City of BostonMassachusetts
Basic Financial Statements
Fiscal Year Ended June 30, 2016
Martin J. Walsh, Mayor
David Sweeney, Chief Financial Officer & Collector Treasurer
Sally D. Glora, City Auditor
Prepared by the City of Boston Auditing Department
Table of Contents
Page
FINANCIAL SECTION
Independent Auditors’ Report ........................................................................................................................................ A‐1
Management’s Discussion and Analysis (Unaudited) ..................................................................................................... A‐4
Basic Financial Statements:
Government‐wide Financial Statements
Statement of Net Position ............................................................................................................................................ A‐17
Statement of Activities ................................................................................................................................................. A‐18
Fund Financial Statements
Balance Sheet – Governmental Funds .......................................................................................................................... A‐20
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position............................ A‐21
Statement of Revenues, Expenditures, and Changes in Fund Balances –
Governmental Funds ................................................................................................................................................ A‐22
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance
Governmental Funds to the Statement of Activities ................................................................................................ A‐23
Statement of Revenues and Expenditures – Budgetary Basis, General Fund –
Budget and Actual .................................................................................................................................................... A‐24
Statement of Net Position – Proprietary Fund ............................................................................................................. A‐25
Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Fund .................................................. A‐26
Statement of Cash Flows – Proprietary Fund ............................................................................................................... A‐27
Statement of Fiduciary Net Position – Fiduciary Funds ................................................................................................ A‐28
Statement of Changes in Fiduciary Net Position – Fiduciary Funds .............................................................................. A‐29
Notes to the Basic Financial Statements .............................................................................. A‐30
Required Supplementary Information (Unaudited):
Schedules of Funding Progress – Other Postemployment Benefits .............................................................................. A‐71
Schedules of Employer Contributions – Other Postemployment Benefits ................................................................... A‐71
Schedule of City’s Proportionate Share of the Net Pension Liability – Boston Retirement System ....................................................................................................................................................... A‐72
Schedule of City’s Contributions – Boston Retirement System .................................................................................... A‐72
(This page intentionally left blank)
Independent Auditors’ Report •A‐1
KPMG LLP Two Financial Center 60 South Street Boston, MA 02111
Independent Auditors’ Report
To the Honorable Mayor and City Council City of Boston, Massachusetts:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Boston, Massachusetts (the City), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Dudley Square Realty Corporation, the Ferdinand Building Development Corporation, and the Permanent Funds, which represent 5.4% and 0.2% of the assets and revenues, respectively, of the governmental activities, and 1.3% and 0.7% of the assets and revenues, respectively, of the aggregate remaining fund information. We also did not audit the financial statements of the Boston Retirement System, the OPEB Trust Fund and the Private-Purpose Trust Funds, which represent 97.3% and 66.4% of the assets and revenues, respectively, of the aggregate remaining fund information. Further, we did not audit the financial statements of the Boston Public Health Commission, Trustees of the Public Library of the City of Boston and the Economic Development and Industrial Corporation of Boston, which represent 57.3% and 90.1% of the assets and revenues, respectively, of the aggregate discretely presented component units. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinions, insofar as they relate to the amounts included for those entities, is based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
A‐2• City of Boston Basic Financial Statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2016, and the respective changes in financial position, and where applicable, cash flows thereof and the budgetary comparison for the City’s General Fund for the year then ended in accordance with U.S. generally accepted accounting principles.
Emphasis of Matters
Adoption of New Accounting Pronouncement
As discussed in Note 2n to the financial statements, in 2016, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. Our opinions are not modified with respect to this matter.
Other Matters
Prior-Year Comparative Information
The financial statements include partial prior-year comparative information related to the budgetary comparison for the City’s General Fund. Such information does not include all of the information required for a presentation in conformity with U.S. generally accepted accounting principles. Accordingly, such information should be read in conjunction with the City’s financial statements for the year ended June 30, 2015, from which such partial information was derived.
Required Supplementary Information
U.S. generally accepted accounting principles require that the management’s discussion and analysis and the schedules listed under Required Supplementary Information in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the GASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and the other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Independent Auditors’ Report •A‐3
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 29, 2016 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
December 29, 2016
A‐4• City of Boston Basic Financial Statements
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
The City of Boston (the City) provides this Management’s Discussion and Analysis to present additional information to
the readers of the City’s basic financial statements. This narrative overview and analysis of the financial activities of
the City is for the fiscal year ended June 30, 2016. Readers are encouraged to consider this information in
conjunction with the additional information that is furnished in the City’s Comprehensive Annual Financial Report
(CAFR).
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City’s financial statements. The City’s basic
financial statements include three components: 1) Government‐wide Financial Statements, 2) Fund Financial
Statements, and 3) Notes to the Financial Statements. This report also contains required supplementary information
regarding historical pension information and other postemployment benefit (OPEB) plan information. The components
of the financial statements are described in the following sections.
Basic Financial Statements
The basic financial statements include two types of financial statements that present different views of the City – the
Government‐wide Financial Statements and the Fund Financial Statements. The Notes to the Basic Financial
Statements supplement the financial statement information and clarify line items that are part of the financial
statements.
Government‐wide Financial Statements
The Government‐wide Financial Statements provide a broad view of the City’s operations in a manner similar to a private sector business. The statements provide both short‐term and long‐term information about the City’s financial position, which assists in assessing the City’s economic condition at the end of the fiscal year. These are prepared using the economic resources measurement focus and the accrual basis of accounting. This basically means they follow methods that are similar to those used by most businesses. They take into account all revenues and expenses connected with the fiscal year even if cash involved has not been received or paid. The Government‐wide Financial Statements include two statements:
The Statement of Net Position presents all of the government’s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference between them reported as net position. Over time, increases or decreases in the City’s net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.
The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will not result in cash flows until future fiscal periods (such as uncollected taxes and earned but unused vacation leave). This statement also presents a comparison between direct expenses and program revenues for each function of the City.
Both the above financial statements present two separate sections as described below.
Governmental Activities – The activities in this section are mostly supported by taxes and intergovernmental revenues (federal and state grants). Most services normally associated with city government fall into this category, including general government, human services, public safety, public works, property and development, parks and recreation, library, schools, public health programs, state and district assessments, and debt service.
Management’s Discussion & Analysis•A‐5
Discretely Presented Component Units – These are legally separate entities for which the City has financial accountability but function independent of the City. For the most part, these entities operate similar to private sector businesses. The City’s four discretely presented component units are the Boston Public Health Commission, the Boston Development & Planning Agency, the Economic Development Industrial Corporation, and the Trustees of the Boston Public Library.
Complete financial statements of the individual component units can be obtained from their respective
administrative offices. Additional information about the City’s component units is presented in the Notes to the
Financial Statements.
The Government‐wide Financial Statements can be found immediately following this discussion and analysis.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated
for specific activities or objectives. The City, like other local governments, uses fund accounting to ensure and
demonstrate compliance with finance‐related legal requirements.
The Fund Financial Statements focus on individual parts of the City government, reporting the City’s operations in
more detail than the Government‐wide Financial Statements. All of the funds of the City can be divided into three
categories. It is important to note that these fund categories use different accounting approaches and should be
interpreted differently. The three categories of funds are:
Governmental Funds – Most of the basic services provided by the City are financed through governmental funds.
Governmental funds are used to account for essentially the same functions reported as governmental activities in
the Government‐wide Financial Statements. However, unlike the Government‐wide Financial Statements, the
Governmental Fund Financial Statements focus on near term inflows and outflows of spendable resources. They also
focus on the balances of spendable resources available at the end of the fiscal year. Such information may be useful in
evaluating the government’s near term financing requirements. This approach is known as using the flow of current
financial resources measurement focus and the modified accrual basis of accounting. Under this approach, revenues
are recorded when cash is received or when susceptible to accrual (i.e., measurable and available to liquidate
liabilities of the current period). Expenditures are generally recorded when liabilities are incurred, except for those
related to long‐term liabilities, which are recorded when due and payable. These statements provide a detailed short
term view of the City’s finances to assist in determining whether there will be adequate financial resources available to
meet the current needs of the City.
Because the focus of governmental funds is narrower than that of the Government‐wide Financial Statements, it is
useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the Government‐wide Financial Statements. By doing so, readers may better understand the
long term impact of the government’s near term financing decisions. Both the governmental fund balance sheet and
the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation
to facilitate this comparison between governmental funds and the governmental activities. These reconciliations are
presented on the page immediately following each governmental fund financial statement.
The City presents four columns in the governmental fund balance sheet and in the governmental fund statement of
revenues, expenditures, and changes in fund balances. The City’s three major governmental funds are the General
Fund, the Special Revenue Fund, and the Capital Projects Fund. All non‐major governmental funds are combined in the
“Other Governmental Funds” column on these statements. The Governmental Fund Financial Statements can be found
immediately following the Government‐wide Financial Statements.
A‐6• City of Boston Basic Financial Statements
Of the City’s governmental funds, the General Fund is the only fund for which a budget is legally adopted. The Statement of Revenues and Expenditures – Budgetary Basis is presented after the governmental fund financial statements. This statement provides a comparison of the General Fund original and final budget and the actual expenditures for the current and prior year on a budgetary basis.
In accordance with state law and regulations, the City’s legally adopted General Fund budget is prepared on a
“budgetary” basis instead of U.S. generally accepted accounting principles (GAAP). Among the key differences
between these two sets of accounting principles are that “budgetary” records property tax as it is levied, while GAAP
records it as it becomes susceptible to accrual, “budgetary” records certain activities and transactions in the General
Fund that GAAP records in separate funds, and “budgetary” records any amount raised to cover a prior year deficit as
an expenditure and any available funds raised from prior year surpluses as a revenue, while GAAP ignores these
impacts from prior years. The difference in accounting principles inevitably leads to varying results in excess or
deficiency of revenues over expenditures. Additional information and a reconciliation of “budgetary” to GAAP
statements is provided in note 4 to the Financial Statements.
Proprietary Funds – These funds are used to show activities that operate more like those of commercial enterprises.
Like the Government‐wide Financial Statements, Proprietary Fund Financial Statements use the economic resources
measurement focus and accrual basis of accounting. There are two types of proprietary funds – enterprise funds and
internal service funds. Enterprise funds charge fees for services provided to outside customers including local
governments. Enterprise Funds provide the same type of information as the business‐type activities of the
Government‐wide Financial Statements within governmental activities, only in more detail. Currently, the City does
not have any enterprise funds. The Internal Service Fund provides health insurance services predominantly to other
funds, departments or agencies of the City. Therefore, its activities are included in the Government‐wide financial
statements within governmental activities.
The Proprietary Funds Financial Statements can be found immediately following the Governmental Fund Financial
Statements.
Fiduciary Funds – These funds are used to account for resources held for the benefit of parties outside the City
government. Fiduciary funds are not reflected in the Government‐wide Financial Statements because the resources
of these funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much
like that used for proprietary funds. They use the economic resources measurement focus and accrual basis of
accounting.
The City’s fiduciary funds are the Employee Retirement Fund (the Boston Retirement System), which accounts for
the transactions, assets, liabilities, and net position of the City employees’ pension plan; the OPEB Trust Fund, which
is an irrevocable trust established for the accumulation of assets to reduce the unfunded actuarial liability associated
with the City’s obligation for other postemployment benefits; and the Private Purpose Trust and Agency Funds, which
include money held and administered by the City on behalf of third parties.
The Fiduciary Funds Financial Statements can be found immediately following the Proprietary Fund Financial
Statements.
Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the
Government‐wide and the Fund Financial Statements. The Notes to the Financial Statements can be found
immediately following the Fiduciary Funds Financial Statements.
Management’s Discussion & Analysis•A‐7
Required Supplementary Information
The basic financial statements are followed by a section of required supplementary information, which includes a
schedule of funding progress and a schedule of employer contributions for the OPEB Trust Fund, a schedule of the City’s
proportionate share of the net pension liability of the Boston Retirement System, and a schedule of the City’s
contributions to the Boston Retirement System.
CURRENT YEAR FINANCIAL IMPACTS
The City of Boston’s OPEB obligation significantly impacts the Government‐wide financial results. Each year, the City is required to recognize an additional portion of its unfunded actuarial accrued liability. The most recent valuation of the City’s OPEB obligations as of June 30, 2015, estimated that the total OPEB unfunded actuarial accrued liability of the City increased by $111.8 million to $2.16 billion. This increase was largely as a result of changes to the discount rate applied in the actuarial valuation.
In fiscal year 2016, the City’s contribution to the OPEB Trust Fund ($150.3 million) for retiree health benefits includes $40.0 million in advance funding toward reducing the unfunded actuarial accrued liability. The ARC was not met in 2016 resulting in an increase in the net OPEB obligation. In fiscal year 2017, the City has also appropriated $40.0 million in advance funding toward reducing the unfunded actuarial accrued liability.
The City of Boston’s net pension liability significantly impacts the Government‐wide financial results. With the implementation of GASB Statement No. 68 in fiscal year 2015, the City is required to report its proportionate share of the Boston Retirement System's collective net pension liability, deferred outflows of resources, deferred inflows of resources, and pension expense. Based on the measurement of the Boston Retirement System's net pension liability as of December 31, 2015, the City's proportionate share of that net pension liability increased by $205.0 million to $1.62 billion.
GOVERNMENT‐WIDE FINANCIAL ANALYSIS
This analysis is based on the Statement of Net Position and the Statement of Activities found directly after
Management’s Discussion and Analysis.
Government‐wide Highlights
Net Position – Primary Government – The total liabilities and deferred inflows of resources of the City exceeded its
assets and deferred outflows of resources at fiscal year ended June 30, 2016 by $(549.0) million (presented as net
position). At year end, the City had a deficit in governmental activities unrestricted net position in the amount of
$(1.16) billion.
Changes in Net Position – Primary Government – The City’s total net position increased by $81.6 million from the
amount reported in fiscal year 2015.
Net Position
As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. The City’s
net deficit totaled $(549.0) million at the end of 2016, compared to a net deficit of $(630.6) million reported at the
end of the previous year.
The components of net position comprise the following: the investment in capital assets such as land, buildings,
equipment, and infrastructure (road, bridges, and other immovable assets), less any related debt used to acquire those
assets that are still outstanding – this amount is $557.1 million indicating that the net book value of the City’s capital
assets exceeds the amount of related capital debt outstanding. The City uses these capital assets to provide services to
citizens; consequentially, these assets are not available for future spending. Although the City’s investment in its
capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must
A‐8• City of Boston Basic Financial Statements
be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
A portion of the City’s governmental activities net position, $53.2 million, represents restricted net position, or
resources that are subject to external restrictions on how they may be used. Internally imposed designations of
resources are not presented as restricted net assets. Unrestricted net position increased $25.7 million from 2015.
Management’s Discussion & Analysis •A‐9
Net Position – Primary Government
(In thousands)
Governmental Activities
Total Primary Government
2016 2015
ASSETS:
$ 1,690,182 $ 1,602,899
1,981,333 1,858,187
94,427 102,677
3,765,942 3,563,763
DEFERRED OUTFLOWS OF RESOURCES:
332,903 114,209
Liabilities:
597,993 607,333
3,985,473 3,699,361
4,583,466 4,306,694
DEFERRED INFLOWS OF RESOURCES:
64,340 1,834
NET POSITION:
557,142 502,985
53,200 51,446
(1,159,303) (1,184,987)
Total net position $ (548,961) $ (630,556)
Noncurrent liabilities ...........................................................................
Total liabilities ..............................................................
Total deferred inflows of resources..................................................
Net investment in capital assets...........................................................
Restricted .............................................................................................
Unrestricted .........................................................................................
Current assets ......................................................................................
Capital assets .......................................................................................
Other assets .........................................................................................
Total assets ...................................................................
Total deferred outflows of resources................................................
Current liabilities ..................................................................................
A‐10• City of Boston Basic Financial Statements
Changes in Net Position – Primary Government
(In thousands)
Governmental Activities
Total Primary Government
2016 2015
Revenues:
Program revenues: $ 203,195 $ 209,382
746,277 670,640
39,381 53,099
General revenues:
2,281,288 2,181,717
199,835 191,172
15,753 15,404
6,058 2,983
3,491,787 3,324,397
Program expenses:
128,288 103,923
52,056 49,884
941,313 941,531
139,816 178,569
118,582 134,506
39,769 35,890
49,959 48,931
1,803,331 1,620,851
96,083 83,276
40,995 49,300
3,410,192 3,246,661
81,595 77,736
Net position ‐ beginning of year (630,556) (708,292)
$ (548,961) $ (630,556)
Charges for services ........................................................................
Operating grants and contributions ................................................
Capital grants and contributions .....................................................
Taxes ...............................................................................................
Grants and contributions not restricted..........................................
Investment income .........................................................................
Miscellaneous .................................................................................
Total revenues...............................................................
General government ............................................................................
Human services ....................................................................................
Public safety .........................................................................................
Public works .........................................................................................
Total program expenses ...............................................
Change in net position ..................................................
Net position‐end of year...................................................................
Property and development ..................................................................
Parks and recreation.............................................................................
Library ..................................................................................................
Schools .................................................................................................
Public health programs.........................................................................
Interest on long‐term debt ..................................................................
Management’s Discussion & Analysis •A‐11
28.3%
6.4%65.3%
Revenues - Governmental ActivitiesFiscal Year 2016
Other
Taxes and Payments in lieu ofTaxes
Program Revenues
$941,313
$139,816 $118,582
$407,150
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
Schools Public Safety Public Works Property andDevelopment
Other
Expenses - Governmental Activities FY16(in thousands)
$1,803,331
A‐12• City of Boston Basic Financial Statements
Governmental Activities
The City’s governmental activities net position increased by $81.6 million over the prior fiscal year. The following net
changes occurred during the course of operations in fiscal year 2016. In the assets accounts, cash and investments
increased by $80.2 million, receivables decreased by $1.9 million, and capital assets increased by $123.1 million. In the
liability accounts, there was a decrease in warrants and accounts payable of $14.9 million and a decrease in accrued
liabilities of $966 thousand. Additionally, an increase of $27.8 million was recorded relative to the City’s other
postemployment benefit obligation and an increase of $205.0 million was recorded relative to the City's net pension
liability in 2016.
During fiscal year 2016, the City’s revenues increased by 5.0%. The City’s largest sources of revenues were property
taxes, excise taxes, and payment in lieu of taxes of $2.28 billion (65.3% of total revenues) and $988.9 million of program
revenues (28.3% of total revenues). Taxes increased by $99.6 million from the previous year. Program revenues
increased by $55.7 million for fiscal year 2016. This is largely due to increases in operating grants and contributions.
The City’s expenses cover a range of services. The largest expenses were for schools ($1.80 billion), public safety ($941.3
million), public works ($139.8 million), property and development ($118.6 million), general government ($128.3
million), public health programs ($96.1 million), and human services ($52.1 million). In 2016, governmental activities
expenses exceeded program revenues (i.e., user charges, operating grants, and capital grants) by $2.42 billion. This
shortfall was covered primarily through taxes ($2.28 billion) and unrestricted grants and contributions ($199.8 million).
Comparative data on these revenues and expenses is itemized in the reporting of the Changes in Net Position –
Primary Government earlier in this Management Discussion and Analysis.
FINANCIAL ANALYSIS OF THE CITY’S FUND STATEMENTS
This analysis is based on the Governmental and Proprietary Fund Financial Statements. As noted earlier, the City uses
fund accounting to ensure and demonstrate compliance with finance related legal requirements.
Fund Highlights
Governmental Funds – Fund Balances – as of the close of fiscal year 2016, the City’s governmental funds reported a
combined ending fund balance of $1.36 billion, an increase of $139.0 million from the prior year. Of this total amount,
$682.8 million represents the unassigned fund balance. The increase in fund balance is largely due to an increase in
property and excise taxes.
Governmental Funds
The focus of the City’s governmental funds is to provide information on near term inflows, outflows, and balances
of spendable resources. Such information is useful in assessing the City’s financial requirements. In particular,
unassigned fund balance may serve as a useful measure of a government’s financial position at the end of the fiscal
year.
General Fund – Fund Balance – The General Fund is the chief operating fund of the City. The City’s General Fund –
Fund Balance Policy states in part to maintain a GAAP unassigned fund balance in the General Fund that is 15%, or
higher, of GAAP General Fund operating expenditures for the fiscal year. The GAAP unassigned fund balance at the end
of fiscal year 2016 was $682.8 million, which represents approximately 23.0% of GAAP General Fund operating
expenditures.
However, because the City is required to follow the statutory basis of accounting rather than GAAP for determining
the amount of unassigned fund balance that can be appropriated, it is the statutory (not the GAAP) fund balance that
is used to calculate “free cash.” Free cash is the amount of statutory fund balance in the General Fund, as certified
by the Commonwealth of Massachusetts’ Department of Revenue, which is available for appropriation and is
generated when actual revenues, on a cash basis, exceed budgeted amounts and encumbrances are less than
appropriations, or both.
Management’s Discussion & Analysis •A‐13
The City has established the General Fund‐Fund Balance Policy to ensure that the City maintains adequate levels of
fund balance to mitigate current and future risks (i.e., revenue shortfalls and unanticipated expenditures). The policy in
full states that the City shall maintain a GAAP Unassigned Fund Balance in the General Fund that is 15% or higher
than the current fiscal year’s GAAP General Fund Operating Expenditures. The City shall only consider the certification
of Free Cash (as defined by the Commonwealth of Massachusetts’ Department of Revenue) in years where the
appropriation of Free Cash shall not cause the fiscal year’s GAAP Unassigned Fund Balance to go below 15% of the
fiscal year’s GAAP General Fund Operating Expenditures, while maintaining a Budgetary Unassigned Fund Balance at
10% or higher of Budgetary Operating Expenditures. The City shall only consider the appropriation of Certified Free
Cash to offset: (1) certain fixed costs such as pension contributions and related post‐retirement health benefits;
and/or (2) to fund extraordinary and non‐recurring events as determined and certified by the City Auditor.
Special Revenue Fund – Fund Balance – The Special Revenue Fund accounts for the proceeds of specific revenue
sources that are restricted or committed to expenditures for predefined purposes. The fiscal year 2016 Special Revenue
Fund balance is reported at $246.7 million, a $38.0 million increase from fiscal year 2015.
Capital Projects Fund – Fund Balance – The Capital Projects Fund accounts for financial resources to be used for
the acquisition or construction of major capital facilities, other than those financed by proprietary funds and trust
funds. The fiscal year 2016 Capital Projects Fund balance is $79.0 million, a $14.3 million increase from fiscal year
2015.
Other Governmental Funds – Fund Balance – Other Governmental Funds account for assets held by the City in
permanent trust funds, as well as the activities related to DSRC and FBDC. The fiscal year 2016 Other Governmental
Funds fund balance is $87.2 million, a $0.2 million decrease from fiscal year 2015.
Internal Service Fund
The City’s Internal Service Fund accounts for the City’s self‐insurance program for health benefits provided by Blue
Cross Blue Shield and Harvard Pilgrim Health Care for City employees, their dependents, and retirees. The Internal
Service Fund is included as part of the governmental activities in the government‐wide financial statements.
Budgetary Highlights
General Fund budgetary highlights include ending fiscal year 2016 with a $1.9 million surplus. There were no material
variances between the original budget and final budget amounts. Significant unfavorable variances from the final
budget to actual results were in the areas of public safety and judgments. Public safety saw an unfavorable variance of
$19.5 million due to a continued high use of overtime in the Police Department and the Fire Department. Also,
judgment and claims saw an unfavorable variance of $7.0 million in court judgments.
Favorable results were reported for General Fund revenue sources, including $29.9 million in excises predominantly in
motor vehicle and room occupancy excise taxes, $22.2 million in payments in lieu of taxes, $22.1 million in licenses
and permits, $12.2 million in departmental and other revenue. Other available funds shows a revenue deficit of $61.5
million, however,this is a result of not transferring $950 thousand of cemetery funds, $20.5 million of parking meter
funds and $40.0 million of free cash from the general fund.
A‐14• City of Boston Basic Financial Statements
CAPITAL ASSETS AND LONG‐TERM OBLIGATIONS
Capital Assets
The City’s investment in capital assets for its governmental activities, as of June 30, 2016, has a net book value of
$1.98 billion, made up of costs totaling $3.83 billion less accumulated depreciation of $1.85 billion. This investment
in capital assets includes land, buildings, improvements, equipment, infrastructure, and construction in progress.
Infrastructure assets are items that are normally immovable and have value only to the City, such as roads, bridges,
streets, sidewalks, drainage systems, lighting systems, and similar items.
The total increase in the City’s investment in capital assets for the current fiscal year was approximately $123.1 million
in terms of net book value. However, actual expenditures to purchase or construct capital assets and contributions of
capital assets were $238.4 million for the fiscal year. Most of this amount was used for the purpose of constructing or
reconstructing buildings and building improvements and infrastructure. Depreciation charges for the year totaled $115.4
million. Additional information on the City’s capital assets can be found in note 8 to the Financial Statements.
Long Term Obligations
Debt Administration – The authority of the City to incur debt is governed by federal and state laws that restrict the
amounts and purposes for which a municipality can incur debt. At year end, the City had $1.25 billion in General
Obligations Bonds principal outstanding – an increase of $29.1 million over last year.
There was one bond issuance that took place in fiscal year 2016. The March 24, 2016 $140.0 million Series A general
obligation bond issuance used to finance various capital projects in the City, along with $8.1 million Series B that were
issued for the purpose of advance refunding prior debt in March 2016. In conjunction with the City’s annual bond
offering, the rating service bureau Moody’s Investors Service reaffirmed the City’s bond ratings at Aaa and the rating
service bureau Standard & Poor’s increased the bond rating to AAA. General Obligation Bonds are backed by the full
faith and credit of the City, including the City’s power to levy additional taxes to ensure repayment of debt. Accordingly,
all general obligation debt currently outstanding has been approved by a vote of the City Council.
Notes and Leases Payable and Other Long Term Obligations – The City’s general long term notes and leases and other
long term obligations increased $265.3 million, or 10.14%, during the current fiscal year. Key factors for this increase
are an increase in the net pension liability of $205.0 million, an increase in the workers’ compensation liability of $9.7
million, and the increase in the net OPEB obligation of $27.8 million.
Additional information on the City’s long term debt obligations can be found in note 10 to the Financial Statements.
NEW ACCOUNTING STANDARDS
The GASB has issued Statement No. 72, "Fair Value Measurement and Application." The objective of this Statement
is to address accounting and financial reporting issues related to fair value measurements. This Statement provides
guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides
guidance for applying fair value to certain investments and disclosures related to all fair value measurements. The
requirements of this Statement are effective for financial statements for periods beginning after June 15, 2015.
The GASB has issued Statement No. 76, “The Hierarchy of Generally Accepted Accounting Principles for State and
Local Governments,” The objective of this Statement is to identify—in the context of the current governmental financial
reporting environment—the hierarchy of generally accepted accounting principles (GAAP). The requirements in this
Statement improve financial reporting by (1) raising the category of GASB Implementation Guides in the GAAP hierarchy,
thus providing the opportunity for broader public input on implementation guidance; (2) emphasizing the
importance of analogies to authoritative literature when the accounting treatment for an event is not specified in
authoritative GAAP; and (3) requiring the consideration of consistency with the GASB Concepts Statements when
Management’s Discussion & Analysis •A‐15
evaluating accounting treatments specified in non‐authoritative literature. The requirements of this Statement are
effective for reporting periods beginning after June 15, 2015.
The GASB has issued GASB Statement No. 79, "Certain External Investment Pools and Pool Participants." The objective
of this Statement is to address accounting and financial reporting for certain external investment pools and pool
participants. Specifically, it establishes criteria for an external investment pool to qualify for making the election to
measure all of its investments at amortized cost for financial reporting purposes. An external investment pool
qualifies for that reporting if it meets all of the applicable criteria established in this Statement. The specific criteria
address (1) how the external investment pool transacts with participants; (2) requirements for portfolio maturity,
quality, diversification, and liquidity; and (3) calculation and requirements of a shadow price. The requirements of
this Statement are effective for reporting periods beginning after June 15, 2015, except for certain provisions on
portfolio quality, custodial credit risk, and shadow pricing. Those provisions are effective for reporting periods
beginning after December 15, 2015.
The GASB has issued GASB Statement No. 82, "Pension Issues—an amendment of GASB Statements No. 67, No. 68, and
No. 73." The objective of this Statement is to address certain issues that have been raised with respect to
Statements No. 67, "Financial Reporting for Pension Plans", No. 68, "Accounting and Financial Reporting for Pensions",
and No. 73, "Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of
GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68". Specifically, this
Statement addresses issues regarding (1) the presentation of payroll‐related measures in required supplementary
information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial
Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to
satisfy employee (plan member) contribution requirements.
FUTURE PRONOUNCEMENTS
The GASB has issued Statement No. 73, "Accounting and Financial Reporting for Pensions and Related Assets That Are
Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68." The
objective of this Statement is to improve the usefulness of information about pensions included in the general
purpose external financial reports of state and local governments for making decisions and assessing accountability. This
Statement establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68,
"Accounting and Financial Reporting for Pensions," as well as for the assets accumulated for purposes of providing
those pensions. It also makes amendments to certain provisions of Statements No. 67 and No. 68. The requirements
of this Statement for pension plans that are within the scope of Statement No. 67 or for pensions that are within the
scope of Statement No. 68 are effective for fiscal years beginning after June 15, 2015. The requirements for defined
benefit pensions not within the scope of Statement No. 68 are effective for fiscal years beginning after June 15, 2016.
Earlier application is encouraged.
The GASB has issued Statement No. 74, "Financial Reporting for Postemployment Benefit Plans Other Than Pension
Plans." The objective of this Statement is to improve the usefulness of information about postemployment benefits
other than pensions (other postemployment benefits or OPEB) included in the general purpose external financial
reports of state and local governmental OPEB plans for making decisions and assessing accountability. This Statement
is effective for financial statements for fiscal years beginning after June 15, 2016.
The GASB has issued Statement No. 75, "Accounting and Financial Reporting for Postemployment Benefits Other
Than Pensions.” The primary objective of this Statement is to improve accounting and financial reporting by state
and local governments for OPEB. It also improves information provided by state and local governmental employers
about financial support for OPEB that is provided by other entities. This Statement replaces the requirements of
A‐16• City of Boston Basic Financial Statements
Statements No. 45, "Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than
Pensions, as amended, " and No. 57, "OPEB Measurements by Agent Employers and Agent Multiple‐Employer Plans, for
OPEB." This Statement is effective for fiscal years beginning after June 15, 2017.
The GASB has issued Statement No. 77, “Tax Abatement Disclosures.” The objective of this Statement is to improve
financial reporting by giving users of financial statements essential information that is not consistently or
comprehensively reported to the public at present related to tax abatements. Disclosure of information about the
nature and magnitude of tax abatements will make these transactions more transparent to financial statement users.
As a result, users will be better equipped to understand (1) how tax abatements affect a government’s future ability to
raise resources and meet its financial obligations and (2) the impact those abatements have on a government’s
financial position and economic condition. The requirements of this Statement are effective for financial statements
for periods beginning after December 15, 2015.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City’s finances for all of the City’s citizens,
taxpayers, customers, investors, and creditors. Questions concerning any of the information provided in this report
or requests for additional information should be addressed to: City of Boston, Auditing Department, Boston City Hall,
Room M 4, Boston, MA 02201. Alternatively, these requests may also be made through email, by contacting the
Auditing Department at [email protected].
Government‐wide Financial Statements • A‐17
StatementofNetPositionJune30,2016(Amounts in thousands)
Primary Government Primary Government
Governmental
Activities Component Units
ASSETS:
Current Assets:
$ 1,480,892 $ 70,639
67,444 12,050
Receivables, net:
19,471 —
94,874 —
20,583 52,911
5,523 1,077
— 2,978
1,395 —
1,690,182 139,655
Noncurrent Assets:
14,289 —
— 54,782
72,918 177,058
Capital assets:
125,171 24,865
1,856,162 53,618
Due from component units 7,220 —
2,075,760 310,323
3,765,942 449,978
DEFERRED OUTFLOWS OF RESOURCES
326,635 32,377
6,268 —
332,903 32,377
LIABILITIES:
Current Liabilities:
90,286 28,231
Accrued liabilities ‐ current:
58,168 —
79,267 —
142,528 —
85,391 3,213
— 5,384
139,375 1,727
2,978 —
— 1,395
597,993 39,950
Noncurrent Liabilities:
1,264,231 18,462
115,075 —
286,558 140,638
1,621,909 170,846
697,700 91,845
— 67,051
— 7,220
3,985,473 496,062
4,583,466 536,012
DEFERRED INFLOWS OF RESOURCES:
62,565 14,034
1,775 —
64,340 14,034
NET POSITION:
557,142 58,546
Restricted for:
4,974 66,719
41,319 —
6,907 —
(1,159,303) (192,956)
$ (548,961) $ (67,691)
See accompanying notes to the basic financial statements.
Depreciable, net ...................................................................................................................................................................................
Cash and investments ...............................................................................................................................................................................
Cash and investments held by trustees ....................................................................................................................................................
Total current assets .....................................................................................................................................................................
Property and other taxes ......................................................................................................................................................................
Intergovernmental ................................................................................................................................................................................
Other .....................................................................................................................................................................................................
Other assets ...............................................................................................................................................................................................
Due from primary government .................................................................................................................................................................
Due from component units .......................................................................................................................................................................
Intergovernmental receivables .............................................................................................................................................................
Cash and investments held by trustee .................................................................................................................................................
Notes and other receivables .................................................................................................................................................................
Nondepreciable assets .........................................................................................................................................................................
Current portion of long‐term debt and leases ...............................................................................................................................................
Total noncurrent assets................................................................................................................................................................
Total assets ....................................................................................................................................................................
Deferred amount for pension costs ...............................................................................................................................................................
Deferred amount from debt refunding .........................................................................................................................................................
Total deferred outflows of resources...............................................................................................................................
Warrants and accounts payable ................................................................................................................................................................
Compensated absences ........................................................................................................................................................................
Judgments and claims ..........................................................................................................................................................................
Payroll and related costs ......................................................................................................................................................................
Deposits and other ...............................................................................................................................................................................
Unearned revenue .........................................................................................................................................................................................
Total liabilities ................................................................................................................................................................
Due to component units ................................................................................................................................................................................
Due to primary government ..........................................................................................................................................................................
Total current liabilities ................................................................................................................................................................
Bonds due in more than one year .............................................................................................................................................................
Notes and leases payable due in more than one year ..............................................................................................................................
Other noncurrent liabilities .......................................................................................................................................................................
Net pension liability ..................................................................................................................................................................................
Other postemployment benefits obligation ..............................................................................................................................................
Unearned revenue ....................................................................................................................................................................................
Due to primary government ......................................................................................................................................................................
Total noncurrent liabilities ..........................................................................................................................................................
Capital projects ..........................................................................................................................................................................................
Unrestricted deficit ........................................................................................................................................................................................
Total net position ...........................................................................................................................................................
Deferred amount for pension costs ..............................................................................................................................................................
Deferred amount from debt refunding .........................................................................................................................................................
Total deferred inflows of resources .................................................................................................................................
Net investment in capital assets ....................................................................................................................................................................
Nonexpendable trust .................................................................................................................................................................................
Expendable trust .......................................................................................................................................................................................
A‐18 • City of Boston Basic Financial Statements
StatementofActivitiesYearEndedJune30,2016(Amounts in thousands)
Program RevenuesOperating
Charges for Grants and Capital Grants andFunctions/Programs Expenses Services Contributions Contributions
$ 128,288 $ 29,389 $ 6,513 $ 3,493
52,056 7 14,979 —
941,313 133,656 62,218 895
139,816 24,269 552 14,063
118,582 4,593 86,300 11,719
39,769 741 461 1,662
49,959 — 3,211 —
1,803,331 10,540 570,730 5,309
96,083 — 1,313 2,240
40,995 — — —
$ 3,410,192 $ 203,195 $ 746,277 $ 39,381
187,942 43,886 48,263 415
24,677 10,215 12,349 —
Trustees of the Public Library of
11,951 1,645 6,545 —
Economic Development and
38,564 21,542 17,035 —
$ 263,134 $ 77,288 $ 84,192 $ 415
General Revenues:
Taxes:
See accompanying notes to the basic financial statements.
Interest on long‐term debt ..................................................
Primary Government: ..........................................................
Governmental activities:......................................................
General government ............................................................
Human services ...................................................................
Public safety ........................................................................
Public works .........................................................................
Property and development .................................................
Parks and recreation............................................................
Library ..................................................................................
Schools .................................................................................
Public health programs ........................................................
Total component units....................................
Total primary government..............................
Component Units: ................................................................
Boston Public Health Commission........................................
Boston Planning & Development Agency.............................
the City of Boston ...........................................................
Industrial Corporation of Boston ....................................
Net position ‐ end of year ...............................................................................................................
Property taxes, levied for general purposes ...........................................................................................
Excises .....................................................................................................................................................
Payments in lieu of taxes ........................................................................................................................
Grants and contributions not restricted ......................................................................................................
Investment income ......................................................................................................................................
City appropriation ........................................................................................................................................
Miscellaneous ..............................................................................................................................................
Special item ‐ gain on sale of land ...............................................................................................................
Total general revenues ...................................................................................................................
Change in net position ................................................................................................................
Net position ‐ beginning of year ......................................................................................................
Government‐wide Financial Statements • A‐19
Net (Expense) Revenue and Changes inNet Position
GovernmentalActivities Component Units
$ (88,893) $ —
(37,070) —
(744,544) —
(100,932) —
(15,970) —
(36,905) —
(46,748) —
(1,216,752) —
(92,530) —
(40,995) —
$ (2,421,339) $ —
— (95,378)
— (2,113)
— (3,761)
— 13
$ — $ (101,239)
1,967,021 —
224,052 —
90,215 —
199,835 —
15,753 49
— 81,682
6,058 6,889
— 2,539
2,502,934 91,159
81,595 (10,080)
(630,556) (57,611)
$ (548,961) $ (67,691)
A‐20 • City of Boston Basic Financial Statements
BalanceSheetGovernmentalFundsJune 30, 2016
(Amounts in thousands)
Other Total
Special Capital Governmental Governmental
General Revenue Projects Funds Funds
ASSETS
$ 1,106,315 $ 211,703 $ 87,418 $ 8,048 $ 1,413,484
364 — 17,846 49,234 67,444
19,471 — — — 19,471
42,415 54,698 12,050 — 109,163
19,224 43,585 667 29,447 92,923
81,110 98,283 12,717 29,447 221,557
2,412 746 — 6,401 9,559
8,615 — — — 8,615
$ 1,198,816 $ 310,732 $ 117,981 $ 93,130 $ 1,720,659
LIABILITIES
$ 43,997 $ 15,693 $ 30,353 $ 243 $ 90,286
Accrued liabilities:
141,068 1,459 — 1 142,528
22,801 43,797 — 30 66,628
945 2,974 — 5,640 9,559
2,978 — — — 2,978
$ 211,789 $ 63,923 $ 30,353 $ 5,914 $ 311,979
DEFERRED INFLOWS OF RESOURCES
38,024 90 8,645 — 46,759
$ 38,024 $ 90 $ 8,645 $ — $ 46,759
FUND BALANCES
— — — 4,974 4,974
— 43,585 78,983 82,242 204,810
266,222 203,134 — — 469,356
682,781 — — — 682,781
949,003 246,719 78,983 87,216 1,361,921
Total liabilities, deferred inflows
$ 1,198,816 $ 310,732 $ 117,981 $ 93,130 $ 1,720,659
See accompanying notes to the basic financial statements.
Cash and investments ............................................................
Cash and investments held by trustees..................................
Receivables, net: ....................................................................
Due to component unit ..........................................................
Revenue not considered available..........................................
Total deferred inflows of resources...................
Total liabilities .................................................
Nonspendable ........................................................................
Total assets ......................................................
Property and other taxes ..................................................
Intergovernmental.............................................................
Departmental and other....................................................
Due to other funds .................................................................
Total receivables .................................................
Due from other funds ............................................................
Due from component units ....................................................
Warrants and accounts payable ............................................
Payroll and related costs....................................................
Deposits and other ............................................................
of resources and fund balances ........................
Restricted ...............................................................................
Assigned .................................................................................
Unassigned .............................................................................
Total fund balances...........................................
Fund Financial Statements • A‐21
ReconciliationoftheBalanceSheetGovernmentalFundstotheStatementofNetPositionJune 30, 2016
(Amounts in thousands)
$ 1,361,921
Amounts reported for governmental activities in the statement of net position are different because:
Capital assets used in governmental activities are not financial resources and therefore are not reported in1,981,332
Certain revenues of the government‐wide financial statements are earned but not considered available46,759
48,779
Some liabilities are not due and payable in the current period and therefore are not reported in the funds
(1,325,278)
(62,266)
(131,136)
4,493
(18,763)
(200,342)
(7,796)
(190,625)
(697,700)
(1,357,839)
(500)
$ (548,961)
See accompanying notes to the basic financial statements.
Landfill..................................................................................................................................................................................
Total fund balance ‐ governmental funds..............................................................................................................................
the governmental fund financial statements............................................................................................................................
in the governmental fund financial statements........................................................................................................................
Internal service funds are included in the government‐wide financial statements..................................................................
Those liabilities consist of:.........................................................................................................................................................
General obligation bonds and notes.....................................................................................................................................
Capital leases........................................................................................................................................................................
Bond issue premiums/discounts, net....................................................................................................................................
Deferred bond refunding losses/gain, net............................................................................................................................
Accrued interest on bonds....................................................................................................................................................
Compensated absences........................................................................................................................................................
Judgments and claims...........................................................................................................................................................
Other postemployment benefits..........................................................................................................................................
Net pension liability, net of deferred amounts.....................................................................................................................
Pollution remediation...........................................................................................................................................................
Net position of governmental activities............................................................................................................................
A‐22 • City of Boston Basic Financial Statements
StatementofRevenues,ExpendituresandChangesinFundBalancesGovernmentalFundsYear Ended June 30, 2016
(Amounts in thousands)
Other TotalSpecial Capital Governmental Governmental
General Revenue Projects Funds Funds
REVENUES:
$ 1,967,687 $ — $ — $ — $ 1,967,687
236,263 — — — 236,263
90,215 — — — 90,215
60,953 4,270 — — 65,223
184 55 25 1,449 1,713
70,005 186 — — 70,191
86,791 40,985 1,742 5,183 134,701
543,683 263,413 20,004 — 827,100
3,055,781 308,909 21,771 6,632 3,393,093
EXPENDITURES:
Current:
80,684 5,822 — 5,923 92,429
31,356 9,126 — — 40,482
610,233 30,366 — — 640,599
101,157 15,630 — — 116,787
33,870 68,881 — — 102,751
22,106 1,272 — — 23,378
33,870 2,771 — — 36,641
1,016,412 126,837 — — 1,143,249
77,932 2,593 — — 80,525
1,100 — — — 1,100
309,083 — — — 309,083
236,661 — — — 236,661
234,450 — — — 234,450
13,873 1,827 216,101 2,325 234,126
164,708 — — — 164,708
2,967,495 265,125 216,101 8,248 3,456,969
Excess (deficiency) of revenues over
88,286 43,784 (194,330) (1,616) (63,876)
OTHER FINANCING SOURCES (USES):
Long‐term debt, notes and capital leases
— — 181,193 — 181,193
— — 8,100 — 8,100
— (1,388) (8,099) — (9,487)
— 2,130 20,929 — 23,059
— — 6,500 1,455 7,955
(1,455) (6,500) — — (7,955)
(1,455) (5,758) 208,623 1,455 202,865
86,831 38,026 14,293 (161) 138,989
862,172 208,693 64,690 87,377 1,222,932
$ 949,003 $ 246,719 $ 78,983 $ 87,216 $ 1,361,921
See accompanying notes to the basic financial statements.
Public safety ......................................................................
Real and personal property taxes .........................................
Excises ...................................................................................
Payments in lieu of taxes .......................................................
Fines ......................................................................................
Investment income ................................................................
Licenses and permits .............................................................
Departmental and other .......................................................
Intergovernmental.................................................................
Total revenues ..................................................
General government .........................................................
Human services .................................................................
Debt service ...........................................................................
Public works ......................................................................
Property and development ...............................................
Parks and recreation .........................................................
Library ...............................................................................
Schools ..............................................................................
Public health programs .....................................................
Judgments and claims .......................................................
Retirement costs ...............................................................
Other employee benefits ..................................................
State and district assessments ..........................................
Capital outlays .......................................................................
Fund balance ‐ end of year ......................................................
Total expenditures.............................................
(under) expenditures.........................................
Refunding bonds issued ........................................................
Payments to escrow agents ..................................................
Premiums on long‐term debt issued......................................
issued ....................................................................................
Transfers in............................................................................
Transfers out .........................................................................
Total other financing sources (uses)..................
Net change in fund balances..............................
Fund balance ‐ beginning of year ............................................
Fund Financial Statements •A‐23
ReconciliationoftheStatementofRevenues,ExpendituresandChangesinFundBalanceGovernmentalFundstotheStatementofActivitiesYearEndedJune30,2016(Amounts in thousands)
$ 138,989
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures In the statement of activities, the cost of
those assets is depreciated over their estimated useful lives Capital outlays and contributions of
123,145
Certain revenues in the statement of activities that are not reported as revenues in the
(21,091)
Issuances of long‐term debt ($173,899) and notes ($15,365) increase long‐term liabilities in the
statement of net position, but are included in the operating statement of the governmental funds
Repayment of bond, note, and lease principal ($131,891) and payments to the escrow agent for
par value of refunded bonds ($9,220) are expenditures in the governmental funds, but reduce
long‐term liabilities in the statement of net position This is the amount by which issuances exceed
(48,153)
Increases in bond premiums net ($11,374) increase the long‐term liabilities in the statement of net
position, but are included in the operating statement of the governmental funds Decreases in
deferred loss on refunding, net ($2,005) decrease deferred outflows, net on the statement of net
(13,379)
Some expenses reported in the statement of activities do not require the use of current financial
resources and therefore are not reported as expenditures in the governmental funds This amount
represents the increase in liabilities for compensated absences ($3,875), other postemployment
benefits ($27,813) and workers compensation ($9,685) , offset by a decrease in liabilities for
interest payable ($2,075), judgments and claims ($2,217) and landfill closure and post closure
costs ($62) and an increase in net pension liability, net of deferred amounts ($46,784) (83,803)
Net loss from the internal service fund, which is presented in the statement
(14,113)
$ 81,595
See accompanying notes to the basic financial statements.
Change in net position of governmental activities...............................................................................................................
Net change in fund balances ‐ total governmental funds.....................................................................................................
capital assets ($238,555 ) exceeded depreciation expense ($115,396 ) and loss on disposals ($14).................................
governmental funds as they are not considered available.................................................................................................
repayments and escrow payments.....................................................................................................................................
position, but are included in the operating statement of governmental funds..................................................................
of activities, but not in the governmental funds.................................................................................................................
A‐24 • City of Boston Basic Financial Statements
StatementofRevenuesandExpendituresBudgetaryBasisGeneralFund–BudgetandActualYearEndedJune30,2016(withcomparativeactualamountsfor2015)(Amounts in thousands)
2016Favorable
Original (Unfavorable) 2015
Budget Final Budget Actual Variance Actual
REVENUES AND OTHER AVAILABLE FUNDS:
$ 1,923,431 $ 1,923,431 $ 1,925,045 $ 1,614 $ 1,839,279
204,351 204,351 234,247 29,896 218,818
424,029 424,029 421,576 (2,453) 413,430
64,735 64,735 76,919 12,184 78,117
60,060 60,060 60,899 839 60,347
66,662 66,662 88,891 22,229 78,831
50 50 184 134 61
52,330 52,330 74,442 22,112 72,536
— — 802 802 —
61,450 61,450 — (61,450) 19,000
2,857,098 2,857,098 2,883,005 25,907 2,780,419
EXPENDITURES:
97,357 89,564 87,435 2,129 98,672
33,207 31,946 31,938 8 31,667
595,866 604,372 623,879 (19,507) 602,663
108,934 103,658 103,639 19 124,664
36,489 37,101 37,001 100 35,717
21,386 25,632 25,546 86 20,416
34,093 34,866 34,863 3 33,291
1,013,500 1,016,285 1,016,277 8 974,925
73,950 76,155 76,155 — 73,827
3,500 3,500 10,454 (6,954) 9,698
247,706 241,294 241,177 117 231,090
188,749 200,649 200,649 — 172,997
163,970 157,626 157,626 — 147,893
238,391 234,450 234,450 — 215,538
2,857,098 2,857,098 2,881,089 (23,991) 2,773,058
Excess of revenues and other available$ — $ — $ 1,916 $ 1,916 $ 7,361
See accompanying notes to the basic financial statements.
Payments in lieu of taxes...............................................................................
Real and personal property taxes, net...........................................................
Excises ...........................................................................................................
Commonwealth of Massachusetts ................................................................
Departmental and other revenue .................................................................
Fines ..............................................................................................................
Library ...........................................................................................................
Investment income .......................................................................................
Licenses and permits .....................................................................................
Miscellaneous ...............................................................................................
Other available funds ....................................................................................
Total revenues and other available funds..............................................
General government .....................................................................................
Human services .............................................................................................
Public safety ..................................................................................................
Public works ..................................................................................................
Property and development ...........................................................................
Parks and recreation .....................................................................................
State and district assessments ......................................................................
Total expenditures ................................................................................
funds over expenditures ...................................................................
Schools ..........................................................................................................
Boston Public Health Commission..................................................................
Judgments and claims ...................................................................................
Other employee benefits ..............................................................................
Retirement costs ...........................................................................................
Debt requirements ........................................................................................
Fund Financial Statements •A‐25
StatementofNetPositionProprietaryFundJune30,2016(Amounts in thousands)
Internal Service
ASSETS:
Current assets:
$ 67,408
578
67,986
Noncurrent assets:
5,523
5,523
73,509
LIABILITIES:
Current liabilities:
24,730
24,730
NET POSITION:
48,779
$ 48,779
See accompanying notes to the basic financial statements.
Accrued liabilities .......................................................................................................................
Total current liabilities ..................................................................................................
Unrestricted ....................................................................................................................................
Total net position ..........................................................................................................
Cash and cash equivalents .........................................................................................................
Receivables ................................................................................................................................
Total current assets ...............................................................................................................
Other assets ...............................................................................................................................
Total noncurrent assets ........................................................................................................
Total assets ...................................................................................................................
A‐26 • City of Boston Basic Financial Statements
StatementofRevenues,ExpensesandChangesinNetPositionProprietaryFundYearEndedJune30,2016(Amounts in thousands)
Internal Service
OPERATING REVENUES:
$ 65,165
265,240
330,405
OPERATING EXPENSES:
344,518
344,518
(14,113)
(14,113)
62,892
$ 48,779
See accompanying notes to the basic financial statements.
Change in net position .................................................................................................
Net position ‐ beginning of year ................................................................................................
Net position ‐ end of year ..........................................................................................................
Employee contributions ................................................................................................................
Employer contributions .................................................................................................................
Total operating revenues ..................................................................................................
Health benefits ..............................................................................................................................
Total operating expenses .............................................................................................
Operating loss ..............................................................................................................
Fund Financial Statements • A‐27
StatementofCashFlowsProprietaryFundYearEndedJune30,2016(Amounts in thousands)
Internal Service
CASH FLOWS FROM OPERATING ACTIVITIES:
$ 330,757
(350,222)
(19,465)
(19,465)
86,873
$ 67,408
RECONCILIATION OF OPERATING LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
$ (14,113)
Adjustments to reconcile operating loss to
(2,971)
352
(2,733)
$ (19,465)
See accompanying notes to the basic financial statements.
Cash and cash equivalents‐ end of year ..................................................................................
Cash received from employees and employer ...............................................................................
Cash paid to vendors.......................................................................................................................
Net cash used in operating activities ..................................................................................
Decrease in cash and cash equivalents ...............................................................................
Cash and cash equivalents‐ beginning of year ........................................................................
Net cash used in operating activities .....................................................................
Operating loss ............................................................................................................................
net cash used in operating activities: ....................................................................................
Changes in operating assets and liabilities: ......................................................................
Other assets .................................................................................................................
Due from component units / receivables ....................................................................
Accounts payable and accrued liabilities .....................................................................
A‐28 • City of Boston Basic Financial Statements
StatementofFiduciaryNetPositionFiduciaryFundsJune30,2016
(ExceptEmployeeRetirementPlan,whichisasofDecember31,2015)(Amounts in thousands)
Employee Private‐
Retirement OPEB Trust Purpose Agency
Plan Fund Trusts Funds
ASSETS:
$ 230,341 $ 25 $ 108,216 $ 7,596
Receivables:
6,904 — — —
18,866 — — —
11,448 — — —
14,634 — 2,542 —
51,852 — 2,542 —
Investments, at fair value:
Short term:
64,794 — — —
6,098 — — —
Equity:
1,066,255 123,900 — —
931,966 38,235 — —
Fixed‐income:
755,454 182,093 — —
214,320 — — —
1,336,641 — — —
415,693 — — —
542,378 — — —
— 34,828 — —
5,333,599 379,056 — —
Securities lending short‐term
184,295 — — —
5,800,087 379,081 110,758 7,596
LIABILITIES:
Accounts payable, accrued
14,843 146 6,888 7,596
41,603 — — —
184,348 — — —
240,794 146 6,888 7,596
NET POSITION:
$ 5,559,293 $ 378,935 $ 103,870 $ —
See accompanying notes to the basic financial statements.
International..............................................................................................
Cash and cash equivalents..................................................................................
Interest and dividends....................................................................................
Securities sold................................................................................................
Employer contributions..................................................................................
Other..............................................................................................................
Total receivables...............................................................................
Domestic....................................................................................................
International..............................................................................................
Domestic....................................................................................................
International..............................................................................................
Domestic....................................................................................................
Held in trust for pension benefits and other purposes.......................................
PRIT Pooled Fund...........................................................................................
Real estate......................................................................................................
Alternative.....................................................................................................
All asset fund..................................................................................................
Total investments.............................................................................
collateral investment pool..............................................................................
Total assets....................................................................................
expenses and other liabilities.........................................................................
Securities purchased...........................................................................................
Collateral held on securities lending...................................................................
Total liabilities...............................................................................
Fund Financial Statements • A‐29
StatementofChangesinFiduciaryNetPositionFiduciaryFundsYearEndedJune30,2016
(ExceptEmployeeRetirementPlan,whichisyearendedDecember31,2015)(Amounts in thousands)
Employee Private‐
Retirement OPEB Trust Purpose
Plan Fund Trusts
ADDITIONS:
Contributions:
$ 218,813 $ 154,494 $ —
120,434 — —
147,090 — —
— — 5,837
486,337 154,494 5,837
Investment earnings:
(104,056) (2,076) 22,862
111,296 4,075 3,600
(23,350) (514) —
(16,110) 1,485 26,462
Securities lending activities:
1,186 — —
(333) — —
853 — —
(15,257) 1,485 26,462
6,929 —
478,009 155,979 32,299
DEDUCTIONS:
548,605 112,244
11,385 — —
23,921 — —
8,952 6 33,153
592,863 112,250 33,153
(114,854) 43,729 (854)
5,674,147 335,206 104,724
$ 5,559,293 $ 378,935 $ 103,870
See accompanying notes to the basic financial statements.
Intergovernmental......................................................................................................................
Total additions........................................................................................................
Benefits...........................................................................................................................................
Reimbursements.............................................................................................................................
Refunds of contributions.................................................................................................................
Employers...................................................................................................................................
Commonwealth of Massachusetts (nonemployer).....................................................................
Employees..................................................................................................................................
Donations and other...................................................................................................................
Total net investment income (loss).........................................................................
Investment income.....................................................................................................................
Less investment expenses..........................................................................................................
Net investment earnings.........................................................................................
Securities lending income......................................................................................................
Less borrower rebates and fees............................................................................................
Net income from securities lending activities..........................................................
Total contributions.................................................................................................
Realized and unrealized gains on investments..........................................................................
Administrative expenses and other................................................................................................
Total deductions.....................................................................................................
Change in net position............................................................................................
Net position ‐ beginning of year....................................................................................................
Net position ‐ end of year.............................................................................................................
A‐30• City of Boston Basic Financial Statements
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2016
1. The Financial Reporting Entity
a. Primary Government
The City of Boston (the City), incorporated as a town in 1630 and as a city in 1822, now exists under Chapter 486 of the Act of 1909 and Chapter 452 of the Acts of 1948 of the Commonwealth of Massachusetts (the Commonwealth), which, as amended, constitute the City’s Charter. The Mayor is elected to a four‐year term and serves as chief executive officer of the City. The Mayor has general supervision of and control over the City’s boards, commissions, officers, and departments. The legislative body of the City is the City Council, which consists of 13 elected members serving two‐year terms.
The accompanying basic financial statements present the City and its component units. The component units discussed below are included in the City’s reporting entity because of the significance of their operational or financial relationships with the City.
b. Blended Component Units Disclosure
i. Boston Retirement System (BRS) is a defined benefit contributory retirement system created under state statute. It is administered by a Retirement Board comprising five members: the City Auditor, who serves ex officio; two individuals elected by participants in the system; a fourth member appointed by the Mayor; and a fifth member chosen by the other members. BRS provides pension benefits to retired City, Boston Planning & Development Agency, Boston Housing Authority, Boston Water and Sewer Commission, and Boston Public Health Commission employees. Although legally separate, BRS provides services entirely, or almost entirely, to the City and thus has been reported as a blended component unit among the City’s fiduciary funds. The financial statements of BRS are included for its fiscal year end which is December 31, 2015.
ii. Dudley Square Realty Corporation (DSRC) and Ferdinand Building Development Corporation (FBDC) – The DSRC is a Qualified Active Low‐Income Community Business, and is the owner and developer of the Dudley Municipal Center property. FBDC is the leverage lender of the Dudley Municipal Center property. FBDC leases the property from DSRC and the City subleases the property from FBDC. The DSRC and FBDC are non‐profit organizations qualified as tax‐exempt entities under Section 501(c)(3) of the Internal Revenue Code. Both entities are instrumentalities of the City, as the Mayor has full control of appointments to their boards of directors. Although legally separate, both DSRC and FBDC provide services entirely, or almost entirely, to the City and thus have been reported as blended component units. These funds are presented as non‐major funds within the other governmental funds as of their fiscal year end, which is June 30, 2016.
Notes to Basic Financial Statements • A‐31
c. Discretely Presented Component Units Disclosure
These component units are reported in a separate column to emphasize that they are legally separate from the City but are included because the City is financially accountable for the organizations, meaning it appoints, at a minimum, a voting majority of the board of directors of the organization and is able to impose its will on the organizations or has a financial benefit or burden relationship with the organizations. Unless otherwise indicated, the Notes to the Financial Statements pertain only to the primary government because certain disclosures of the component units are not significant relative to the total component units and to the primary government. A description of the component units, criteria for inclusion, and their relationship with the City are as follows:
i. Boston Planning & Development Agency (BPDA) – The BPDA is legally separate from the City and a body politic and corporate constituting the City’s redevelopment authority and exercising the powers of a planning board for the City. The BPDA is governed by a five‐member board, four of whom are appointed by the Mayor and confirmed by the City Council, and one of whom is appointed by the Governor of Massachusetts (same board members as the EDIC). The BPDA receives a significant amount of intergovernmental revenue, which is used solely for capital projects that are under the oversight of the BPDA. In accordance with GASB Statement No. 61, the BPDA is presented as a discrete component unit of the City.
ii. Economic Development and Industrial Corporation of Boston (EDIC) – The EDIC is legally separate from the City and a body politic and corporate and an instrumentality of the Commonwealth. The EDIC is governed by a five‐member board, four of whom are appointed by the Mayor and confirmed by the City Council, and one of whom is appointed by the Governor of Massachusetts (same board members as the BPDA). The EDIC receives a significant amount of intergovernmental revenue, including grants and contracts with the City for jobs and community service activities. In accordance with GASB Statement No. 61, the EDIC is presented as a discrete component unit of the City.
iii. Boston Public Health Commission (BPHC) – The BPHC is legally separate from the City and a body politic and corporate and an instrumentality of the Commonwealth. The BPHC is governed by a seven‐member board, six of whom are appointed by the Mayor and confirmed by the City Council, and one of whom is the chief executive officer of the Boston Medical Center. The BPHC receives the majority of its funding from a City appropriation, EMS and other third party billings, and federal and state grants. The BPHC expects that the City will continue to provide support for the public health programs of the BPHC. In accordance with GASB Statement No. 61, the BPHC is presented as a discrete component unit of the City.
iv. Trustees of the Public Library of the City of Boston (TPL) – The TPL is legally separate from the City of Boston and is a non‐profit organization qualified as a tax‐exempt entity under Section 501(c)(3) of the Internal Revenue Code. The trustees of the TPL are appointed by the Mayor and the TPL places substantial reliance upon the City to fund its daily operations. In addition, the Library receives significant support through state and federal government appropriations and private sources. In accordance with GASB Statement No. 61, the TPL is presented as a discrete component unit of the City.
The financial statements of the discretely presented component units are included for their respective fiscal year ends, which is June 30, 2016.
A‐32• City of Boston Basic Financial Statements
Complete financial statements of these discretely presented component units can be obtained through the City Auditor’s office, Room M‐4, City Hall Plaza, Boston, Massachusetts 02201. In addition, condensed financial statements for the discretely presented component units are included in note 20.
d. Related Organizations
The Mayor is also responsible for appointing members of the governing bodies of the Boston Housing Authority, Boston Industrial Development Finance Authority, and Boston Water and Sewer Commission; however, the City’s accountability for these organizations does not extend beyond making these appointments.
2. Summary of Significant Accounting Policies
The accounting policies of the City conform to U.S. generally accepted accounting principles as applicable to governmental units as prescribed by the Governmental Accounting Standards Board (GASB). The following is a summary of the more significant policies followed by the City:
a. Government‐wide and Fund Financial Statements
The Government‐wide Financial Statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from any business‐type activities, which rely to a significant extent on fees and charges for support. The City currently reports no business‐type activities. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
Separate financial statements are provided for Governmental Funds, Proprietary Funds, and Fiduciary Funds, even though the latter are excluded from the Government‐wide Financial Statements. Major individual Governmental Funds are reported as separate columns in the Fund Financial Statements.
b. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
i. Government‐wide Financial Statements
The Government‐wide Financial Statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund and Fiduciary Fund Financial Statements. The Agency Fund within the Fiduciary Fund Financial Statements has no measurement of results. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements for recognition have been met.
Notes to Basic Financial Statements • A‐33
ii. Governmental Fund Financial Statements Governmental Fund Financial Statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are “susceptible to accrual” (i.e., both measurable and available). Revenues not considered to be available are recorded as deferred inflows of resources.
The City applies the susceptible to accrual criteria to property and other taxes and intergovernmental revenues. In applying the susceptible to accrual concept to intergovernmental revenues, there are essentially two types of revenues. In one, resources must be expended on the specific purpose or project before any amounts will be reimbursed to the City; therefore, revenues are recognized based upon the amount of expenditures incurred subject to availability requirements. In the other, resources are virtually unrestricted and are usually revocable by the grantor only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. Property and other taxes are recognized as revenue in the year for which taxes have been levied or earned, provided they are collected within 60 days after year‐end. Generally, intergovernmental revenues are recognized as revenue provided they are earned during the year and collected within one year after year‐end, except for Massachusetts School Building Authority (MSBA) and Chapter 90 receivables which are considered available when received.
Expenditures generally are recorded when a liability is incurred. However, debt service expenditures, as well as expenditures related to long‐term liabilities including compensated absences, other postemployment benefits, workers’ compensation and judgments and claims, are recorded only when payment is mature and due.
iii. Proprietary Fund Financial Statements Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from the provision of services. The principal operating revenues of the City’s Internal Service Funds are receipts from employer and employees for health insurance premiums. Operating expenses for the Internal Service Fund include administrative expenses, vendor payments, and health benefits. Any revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
iv. Description of Major Funds Governmental funds – The City reports the following major governmental funds:
1. The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.
2. The Special Revenue Fund accounts for the proceeds of specific revenue sources (other than trusts for individuals, private organizations, or other governments, or for major capital projects) that are legally restricted or assigned to expenditures for various general governmental functions.
3. The Capital Projects Fund accounts for bond proceeds and grant revenues used for the acquisition or construction of the City’s capital facilities.
Proprietary fund –The City reports the following proprietary fund:
4. The City uses an internal service fund to account for its self‐insured health costs. Although the fund is presented in a separate column in the accompanying proprietary fund financial statements, it is not considered a major fund.
A‐34• City of Boston Basic Financial Statements
Fiduciary Funds – The City reports the following fiduciary fund types:
5. The Private Purpose Trust Funds are used to account for resources legally held in trust for the benefit of individuals, private organizations, or other governments. The City operates four pools used for the improvement of the City’s parks and cemeteries, educational scholarships and sporting equipment, creation of public utility and beauty, and co‐mingled nontestamentary trusts.
6. The Pension Trust Fund accounts principally for the activities of the Boston Retirement System, a blended component unit, which accumulates resources for pension benefit payments to retired employees of the City and other entities.
7. The OPEB Trust Fund is an irrevocable trust fund established for other postemployment benefits. The assets are appropriated from the General Fund and accumulate to reduce the unfunded actuarial liability for health care and other postemployment benefits. The assets of the trust are currently not used for direct payments of benefits.
8. The Agency Funds are used to report funds held by the City in a purely custodial capacity. The City currently operates a drug evidence account for proceeds of property seized from illegal drug‐related activities. These funds are then used to offset the costs of technical equipment or expertise and investigations.
c. Cash Equivalents
For purposes of the statement of cash flows, investments with original maturities of three months or less when purchased are considered to be cash equivalents.
d. Basis of Investment Valuation
Investments generally are presented in the accompanying basic financial statements at fair value. Where applicable, fair values are based on quotations from national securities exchanges, except for certain investments of BRS, which are described in notes 5 and 11. Further, income from investments is recognized in the same fund as the related investments.
The City invests in the Massachusetts Municipal Depository Trust (MMDT) Cash Portfolio, which is an external investment pool and is not SEC‐registered. The fund is state‐regulated and is valued at amortized cost.
e. Interfund Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.”
f. Uncollectible Tax and Other Receivables
All receivables are shown net of an allowance for uncollectibles. Amounts considered to be uncollectible are based on the type and age of the related receivable.
g. Capital Assets
Capital assets include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), and intangible assets such as easements, land use rights, computer software, trademarks and patents. Capital assets are reported in the governmental activities column in the Government‐wide Financial Statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $25,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value
Notes to Basic Financial Statements • A‐35
at the date of donation. Any significant construction commitments are encumbered at year‐end in the City’s Capital Projects Fund.
The costs of normal maintenance and repairs that do not add to the capacity or efficiency of the asset or materially extend assets’ useful lives are not capitalized.
Capital assets of the primary government are depreciated using the straight‐line method over the following estimated useful lives:
Assets Years
Buildings 30
Building improvements 30
Infrastructure 30
Land improvements – major 30
Land improvements – playgrounds 15
Computer upgrades 10
Equipment and machinery 10
Intangible assets, computer software and l icenses 5
Computers and related equipment 3
Furniture and fixtures 3
Motor vehicles 3
h. Compensated Absences
Employees are granted sick and vacation leave in varying amounts. Upon retirement, termination, or death, certain employees are compensated for unused sick and vacation leave (subject to certain limitations) at their then current rates of pay. Public Safety employees are compensated for unused personal leave in addition to sick and vacation leave. The portion of the liability related to unused sick and vacation time that has matured or is due as of June 30, 2016 is recorded in the Governmental Fund Financial Statements. The entire amount of the liability is reported in governmental activities in the Government‐wide Financial Statements. The liability for vacation leave is based on the amount earned but not used; for sick leave, it is based on the amount accumulated at the balance sheet date that would be paid upon termination (vesting method). The liability for both amounts is calculated based on the pay or salary rates in effect at the balance sheet date.
i. Long‐Term Obligations and Related Costs
Long‐term debt and other long‐term obligations are reported as liabilities in the Government‐wide Statement of Net Position. Bond premiums and discounts are capitalized and amortized over the life of the bonds using the straight line method, which approximates the effective interest method. The unamortized portion is presented in the Government‐wide Statement of Net Position as a component of bonds payable. Bond issuance costs are reported as expenses when incurred.
The Governmental Fund Financial Statements recognize bond premiums and discounts, as well as bond issuance costs, during the period incurred. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
A‐36• City of Boston Basic Financial Statements
j. Net Position and Fund Balance
In the Government‐wide and Proprietary Fund Financial Statements, net position is reported in the following categories:
Net investment in capital assets: Capital assets, net of accumulated depreciation, and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
Restricted: Net position the use of which is subject to constraints imposed by external parties, including creditors, grantors, and laws and regulations of other governments, or imposed by City Charter or enabling legislation. Nonexpendable amounts are required to remain intact under such constraints.
Unrestricted: Remaining net position not considered net investment in capital assets or restricted.
For purposes of net position classification, when both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed.
In the Governmental Fund Financial Statements, fund balance is reported in the following categories:
Nonspendable: Amounts that cannot be spent because they are either not in spendable form or they are legally or contractually required to remain intact.
Restricted: Amounts the use of which is subject to constraints imposed by external parties, including creditors, grantors, and laws and regulations of other governments, or imposed by City Charter or enabling legislation.
Committed: Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision‐making authority. For the City, this formal action takes the form of statutes which are passed by the City Council and approved by the Mayor.
Assigned: Amounts that are constrained by the City’s intent for use for specific purposes, but are considered neither restricted or committed. Under M.G.L. Chapter 190, Acts of 1982, the City Auditor has the authority to assign amounts to be used for specific purposes on behalf of the City.
Unassigned: Amounts in the general fund that are not otherwise constrained for a specific purpose more narrow than the general operations of the City. The City maintains a formal policy that unassigned fund balance in the General Fund be at least 15 percent of the current year’s General Fund GAAP basis operating expenditures.
For purposes of fund balance classification, when both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. When unrestricted resources are used, committed resources are used first, followed by assigned and unassigned resources, respectively.
k. Tax Abatement Refunds
Matured tax abatement refunds that are due and payable at June 30 have been recorded as a liability in the General Fund. A liability for estimated future tax abatement refunds has been recorded in the Government‐wide Statement of Net Position.
Notes to Basic Financial Statements • A‐37
l. Landfill Closure and Postclosure Care Costs
State and federal regulations require the City to place a final cover on its Gardner Street landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after closure. At June 30, 2016, 100% of the Gardner Street landfill site had been used and has not accepted solid waste for several years. While most of the landfill closure construction was completed in prior years, there still remains 12 acres of the landfill to be capped as of June 30, 2016.
The total current cost of landfill closure and postclosure care is an estimate, subject to changes resulting from inflation, deflation, technology, or other changes in applicable laws or regulations. Such costs are recognized as expenditures in the General Fund to the extent that they are due or matured and are expected to be paid with expendable available financial resources. The total liability is reported in the Government‐wide Statement of Net Position. Expenditures related to the Gardner Street landfill site postclosure care in fiscal year 2016 were $62 thousand.
m. Use of Estimates
The preparation of the accompanying basic financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
n. Adoption of Accounting Pronouncements
The City adopted Governmental Accounting Standards Board (GASB) Statement No. 72, "Fair Value Measurement and Application." The scope of this statement is to improve financial reporting by clarifying the definition of fair value for financial reporting purposes, establishing general principals for measuring fair value, providing additional fair value application guidance, and enhancing disclosures about fair value measurements. The City has incorporated the required disclosures about fair value measurements, but adoption of the statement did not impact financial statement amounts.
3. Short‐Term Debt
During fiscal year 2016, the City had no short‐term debt issued or outstanding.
4. Budgetary Data
The General Fund is the only fund for which a budget is legally adopted. The budgets for all departments included in the General Fund of the City, except the School Department, are prepared under the direction of the Mayor and City Council. The School Department budget is prepared under the direction of the School Committee.
Original and supplemental appropriations are submitted by the Mayor, approved by the City Council, and lapse at year‐end unless encumbered. The legal level of control over appropriations is at the department level. Amendments to the original budget must be approved by the City Council, except for a reallocation of appropriations of up to $3.0 million, which the Mayor may approve. Further, the City Auditor, with the approval of the Mayor, may make transfers from any appropriation to any other appropriation for purposes of eliminating deficits before closing the books for the fiscal year. After the close of the fiscal year, the City Auditor may, with the approval of the Mayor, apply any income, taxes, and funds not disposed of and make transfers from any appropriation to any other appropriation for the purpose of closing the accounts for the fiscal year.
The City must establish its property tax rate each year so that the resulting property tax levy will comply with the limits required by Proposition 2‐1/2 (note 6). The tax levy must equal the sum of (a) the aggregate of all annual appropriations for expenditures; plus (b) the reserve accounts described in the following paragraph; plus (c)
A‐38• City of Boston Basic Financial Statements
provision for the prior fiscal years’ deficits, if any; less (d) the aggregate of all non‐property tax revenues projected to be received by the City, including available funds, in amounts certified or approved by the Commonwealth for tax rate purposes.
In accordance with the 1986 amendments to the Funding Loan Act of 1982, the City has established two reserve funds. The first is a budget reserve fund, which is required to be funded in stages to a final level of 2‐1/2% of the prior year’s overall departmental appropriations, except the School Department, by the beginning of fiscal year 1990. It is available to be applied to extraordinary and unforeseen expenditures. The second is a separate reserve fund of 1% to 2‐1/2% of the current year appropriation of the School Department to be applied to over expenditures in that department.
The City’s General Fund budget is prepared on a basis other than accounting principles generally accepted in the United States of America (GAAP). The “actual” results column in the Statement of Revenues and Expenditures – Budgetary Basis – General Fund is presented on a “budgetary basis” to provide a meaningful comparison of actual results with the budget. The major differences between the budget and GAAP basis, where applicable, are that:
i. Revenues are recorded when cash is received, except for real estate and personal property taxes, which are recorded as revenue when levied (budget), as opposed to when susceptible to accrual (GAAP).
ii. Encumbrances and continuing appropriations are recorded as the equivalent of expenditures (budget) but have no effect on GAAP expenditures.
iii. Certain activities and transactions are presented in separate funds (GAAP), rather than as components of the General Fund (budget).
iv. Amounts raised for the prior years’ deficits and available funds from prior years’ surpluses are recorded as revenue items (budget), but have no effect on GAAP revenues.
In addition, there are certain differences in classifications between revenues, expenditures, and transfers. The following reconciliation summarizes the differences between budgetary and GAAP basis accounting principles for the year ended June 30, 2016 (in thousands):
Excess
of revenue and
Other other
financing financing
Revenue Expenditures uses, net sources
As reported on a budgetary basis $ 2,883,005 2,881,089 — 1,916
Adjustments:
Revenues to modified accrual basis 52,342 — — 52,342
Expenditures, encumbrances, and
accruals, net — (32,573) — 32,573
On‐behalf contribution for
teachers pension 120,434 120,434 — —
Reclassifications:
Other transfers — (1,455) 1,455 —
As reported on a GAAP basis $ $3,055,781 $ 2,967,495 $ 1,455 $ 86,831
Notes to Basic Financial Statements • A‐39
5. Deposits and Investments
State and local statutes place certain limitations on the nature of deposits and investments available to the City. Deposits, including demand deposits, money markets, and certificates of deposit in any one financial institution, may not exceed 60% of the capital and surplus of such institution unless collateralized by the financial institution involved. Investments from operating cash in the general fund may be made in unconditionally guaranteed U.S. government obligations having maturities of a year or less from the date of purchase, or through repurchase agreements with maturities of no greater than 90 days in which the underlying securities consist of such obligations. Other allowable investments include authorized bonds of all states, bankers’ acceptances, commercial paper rated within the three highest classifications established by rating agencies, and units in the MMDT. MMDT, which is an external investment pool that is overseen by the Treasurer of the Commonwealth of Massachusetts, meets the criteria established by GASB 79 to report its investments at amortized cost; therefore the City reports its investments in MMDT at amortized cost which approximates the net asset value of $1.00 per share. MMDT has a maturity of less than 1 year and is not rated. The three highest commercial paper classifications for Moody’s and Standard & Poor’s (S&P) are as follows:
Commercial Paper Credit RatingsMoody's S&P
Superior P1 A1+ or A1Satisfactory P2 A2Adequate P3 A3
Primary Government (except the pension trust fund)
a. Custodial Credit Risk
Custodial credit risk is the risk that in the event of bank failure, the City’s deposits or investments may not be returned. The City carries deposits that are fully insured by FDIC insurance or collateralized in the City’s name. All of the City’s investments are held by third parties in the City’s name. As of June 30, 2016, the City of Boston Trust Funds had uninsured and uncollateralized deposits of $14.6 million and uninsured and uncollateralized investments of $1.5 million.
b. Investment Policy
The City’s primary concern in connection with its investment activities is a concern shared by all municipal governments: the preservation of capital. The City’s investment policy establishes a discipline in which all of the City’s investment activities may be safely conducted while it strives to use its capital resources as efficiently as possible. The foundation of that discipline is fixed by Massachusetts General Laws (M.G.L.) c. 44, sec. 55, which prohibits Massachusetts communities from investing in certain categories of high‐risk investments; limits the amount of the City’s bank deposits in any one financial institution; and establishes qualifying criteria for banking institutions. Further, all investments held by third parties are to be held in the City’s name.
c. Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. It is the City of Boston Trust Funds’ policy to limit the average duration of an actively managed fixed income portfolio to no more than seven years. The following is a listing of the City’s fixed income investments (in thousands) and related maturity schedule (in years) as of June 30, 2016:
A‐40• City of Boston Basic Financial Statements
Investment type Fair Value Less than 1 1‐5 6‐10 More than 10
Money market mutual funds 152,688 152,688 — — — Institutional and mutual funds 59,869 — — 19,772 40,097U.S. Treasury and agencysecurities 41,184 1,088 5,045 5,428 29,623Corporate debt instruments 56,180 337 2,202 34,440 19,201
$ 309,921 $ 154,113 $ 7,247 $ 59,640 $ 88,921
d. Credit Risk
It is the City of Boston Trust Funds’ policy that there shall be no specific limitation in regard to credit worthiness of securities, except the overall average quality of each fixed income portfolio shall be AA or better. The City’s fixed income investments as of June 30, 2016 were rated by S & P and/or an equivalent national rating organization, and the ratings are presented below using the S & P rating scale (in thousands):
Investment type Fair Value Rating
Money market mutual funds $ 152,688 Not Rated
Institutional and mutual funds 59,869 AAA to A3
U.S. Treasury and agency securities 38,262 AAA to A3
U.S. Treasury and agency securities 1,725 Baa1 to B3
U.S. Treasury and agency securities 45 Caa1 to Ca1
U.S. Treasury and agency securities 1,152 Not Rated
Corporate debt instruments 46,298 AAA to A3
Corporate debt instruments 6,579 Baa1 to B3
Corporate debt instruments 2,261 Caa1 to Ca1
Corporate debt instruments 1,042 Not Rated
$ 309,921
e. Concentration Risk
The City adheres to the provisions of M.G.L. c. 44, sec. 55 when managing concentration risk. M.G.L. c. 44, sec. 55 contains several restrictions limiting where and under what circumstances the City may deposit its funds. No investments in a single issuer exceeded 5% of the City’s investment portfolio.
f. Foreign Currency Risk
Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. As of June 30, 2016, the City of Boston Trust Funds held international equity mutual funds valued at $44.9 million. Although these investments are not denominated in a foreign currency, the underlying securities are denominated in various foreign currencies.
g. Fair Value Hierarchy
Investments are measured at fair value on a recurring basis. Recurring fair value measurements are those that GASB statements require or permit in the Statement of Net Position or Balance Sheet at the end of each reporting period. Fair value measurements are categorized based on the valuation inputs used to measure an asset's fair value: Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date; Level 2 inputs are other than quoted prices in Level 1 that are observable for the asset or liability, or similar assets or liabilities either directly or indirectly through corroboration with observable market data; Level 3 inputs are significant unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Notes to Basic Financial Statements • A‐41
The following is a description of the valuation methodologies used for assets measured at fair value.
Money market funds: Valued at the daily closing price as reported by the fund. Money market funds held by the Pool are open‐end money market funds that are registered with the Securities and Exchange Commission. The money market funds held by the City and classified as Level 1 are deemed to be actively traded.
Institutional and mutual funds: Valued at the daily closing price as reported by the fund. Institutional and mutual funds held by the City are open‐end funds that are registered with the Securities and Exchange Commission. The institutional and mutual funds held by the Pool and classified as Level 1 are deemed to be actively traded. If market quotations are not readily available, the funds are valued by the pricing method determined by investment managers which determines valuations using methods based upon market transactions for comparable securities.
Equity securities: Consist primarily of corporate stocks traded on U.S. and non‐U.S. active security exchanges. Stocks traded on active exchanges and valued at quoted market prices and documented trade history for identical assets are categorized within Level 1 of the fair value hierarchy. If market quotations are not readily available, the stocks may be valued using pricing models maximizing the use of observable inputs for similar securities and are classified as Level 2.
US. Treasury and agency securities: Securities issued by the U.S. government, its agencies, authorities and instrumentalities are valued using quoted prices, documented trade history in the security, and pricing models maximizing the use of observable inputs determined by investment managers.
Corporate debt instruments: Valued either by using pricing models maximizing the use of observable inputs for similar securities or valued by the investment manager.
The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the City believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine if the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Fair Value Measurements Using:
Quoted Prices in Significant
Active Markets Other Significant
for Identical Observable Unobservable
Assets Inputs Inputs
(Level 1) (Level 2) (Level 3) Total
Investments:
Money market funds 152,688 — — 152,688
Institutional and mutual
funds 87,385 60,719 — 148,104
Equity securities 41,732 139,632 — 181,364
US Treasury & agency
securities 1,364 39,820 — 41,184
Corporate debt
instruments 32,837 23,343 — 56,180
Total Investments: 316,006 263,514 — 579,520
A‐42• City of Boston Basic Financial Statements
Boston Retirement System (BRS or the System)
a. Custodial Credit Risk
Custodial credit risk is the risk that in the event of bank failure, the System’s deposits may not be returned. The System carries deposits that are fully insured by the Federal Deposit Insurance Corporation (FDIC) insurance or collateralized with securities held by the System or the System’s agent in the System’s name. As of December 31, 2015, all of the System’s deposits were insured or collateralized.
b. Investment Policy
The provisions of M.G.L. C. 32, Sec 23(2); 840 C.M.R. 16‐19, 21, 23, 26; and, the Plan’s own investment regulations (stated at www.mass.gov/perac/investup/bostonintsup.html) govern the System’s investment practice. Diversification is attained through varied investment management styles that comply with Massachusetts state law. This is accomplished through the retention of investment managers that adhere to M.G.L. C. 32, Sec. 3(3), the “Prudent Person” rule.
The System has retained an investment consultant to work with the Retirement Board in a fiduciary capacity to assure that strategic investment diversification is attained, to employ investment managers with expertise in their respective asset classes, and to closely monitor the implementation and performance of the respective investment strategies.
The System is currently invested in stocks (domestic and foreign), fixed income securities (domestic and foreign), real estate, private equity, PRIT and hedge funds.
c. Interest Rate Risk
The following is a listing of the System’s fixed income investments (in thousands) and related maturity schedule (in years) as of December 31, 2015:
Investment type Fair Value Less than 1 1‐5 6‐10 More than 10
U.S. Treasury notes and bonds $ 79,771 3,730 54,263 6,822 14,956 U.S. agencies 83,170 — 1,495 880 80,795Domestic corporate 503,609 2,162 73,083 148,764 279,600Municipal 6,127 — 3,139 — 2,988International corporate 171,256 107 12,295 17,753 141,101International government 35,000 — 7,870 15,414 11,716Asset‐backed:
CMOs 42,612 — 4,599 140 37,873Other 48,229 — 18,740 5,892 23,597
$ 969,774 $ 5,999 $ 175,484 $ 195,665 $ 592,626
The System’s guidelines do not specifically address limits on maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The manager of each fixed income portfolio is responsible for determining the maturity and commensurate returns of their portfolio.
The collateralized mortgage obligations (CMOs) held by the System as of December 31, 2015 are highly sensitive to changes in interest rates.
d. Credit Risk
The System allows investment managers to apply discretion under the “Prudent Person” rule. Investments are made, as a prudent person would be expected to act with discretion and intelligence, to seek reasonable income, preserve capital, and, in general, avoid speculative investments.
Notes to Basic Financial Statements • A‐43
The System’s fixed income investments as of December 31, 2015 were rated by S & P and/or an equivalent national rating organization and the ratings are presented below (in thousands) using the S & P rating scale:
Fair NotInvestment type Value AAA AA A BBB BB B CCC rated
U.S. agencies $ 83,170 — 2,108 — — — — — 81,062 Domestic corporate 503,609 1,579 4,277 25,283 62,329 29,254 37,170 30,555 313,162Municipal 6,127 1,242 3,461 1,424 — — — — —Internationalcorporate 171,256 2,096 3,122 6,314 11,851 2,529 4,817 — 140,527Internationalgovernment 35,000 4,348 2,350 4,700 2,347 1,269 — — 19,986Asset‐backed:CMOs 42,612 7,620 6,033 7,390 — — — — 21,569Other 48,229 23,704 2,024 2,855 418 — — — 19,228
$ 890,003 40,589 23,375 47,966 76,945 33,052 41,987 30,555 595,534
In addition to the above schedule, the System has approximately $79.8 million invested in U.S. government securities, which are not rated as they are explicitly guaranteed by the U.S. government.
e. Concentration Risk
The System has no investments, at fair value, except for pooled funds, that exceed 5% of the System’s total investments as of December 31, 2015.
The System adheres to the provisions of M.G.L. c. 32, sec. 23(2); 840 C.M.R. 16‐19, 21, 23, 26; and the Plan’s own investment regulations when managing concentration risk.
f. Foreign Currency Risk
Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. Similar to the investments in domestic equities, the System employs or encourages its investment advisor to employ diversification, asset allocation, and quality strategies.
A‐44• City of Boston Basic Financial Statements
Risk of loss arises from changes in currency exchange rates. The System’s exposure to foreign currency risk is presented on the following table (in thousands):
Cash andshort‐term
Currency investments Fixed income Equity Alternative Total
Australian dollar 148 2,457 23,446 501 26,552
Brazil ian real — 114 — — 114
Canadian dollar 286 1,686 — — 1,972
Danish krone 52 670 19,433 — 20,155
Euro currency 1,369 12,296 189,841 9,548 213,054
Hong Kong dollar 86 — 23,627 — 23,713
Hungarian forint — 390 — — 390
Indonesian rupiah 52 701 163 — 916
Israeli Shekel 30 — 1,350 — 1,380
Japanese yen 302 8,181 109,209 — 117,692
Malaysian ringgit 10 241 — — 251
Mexican peso 187 2,129 — — 2,316
New Taiwan dollar 18 — — — 18
New Zealand dollar 42 — 165 — 207
Norwegian krone 25 1,904 1,252 — 3,181
Philippine Peso — 346 — — 346
Polish zloty 203 737 — — 940
Pound sterling 434 4,423 113,723 9,439 128,019
Singapore dollar 97 559 6,976 — 7,632
South African rand 109 — — — 109
South Korean won 262 1,685 6,637 — 8,584
Swedish krona 79 785 11,517 — 12,381
Swiss franc 51 589 58,519 — 59,159
Thailand Baht 28 — — — 28
Turkish Lira 29 92 — — 121
Total securities
subject to
foreign
currency risk $ 3,899 39,985 565,858 19,488 629,230
U.S. dollars (securities
held by international
investment managers) — 33,035 43,147 — 76,182
Total international
investmentsecurities $ 3,899 73,020 609,005 19,488 705,412
g. PRIT Pooled Fund
The Commonwealth enacted Chapter 112, Section 17 of the Acts of 2010 that requires the System to invest all assets, current and future, related to Boston Teachers in the Pension Reserves Investment Trust (PRIT) fund. The PRIT fund is an external investment pool that is not registered with the Securities Exchange Commission, but is subject to oversight provided by the Pension Reserves Investment Management Board
Notes to Basic Financial Statements • A‐45
(the PRIM Board). The PRIM Board was created by legislation to provide general supervision of the investments and management of PRIT. PRIT is not a rated fund.
The fair value of the PRIT fund is based on unit value as reported by management of the PRIT fund. The PRIT fund issues separately available audited financial statements with a year end of June 30.
As of December 31, 2015, the System had $1.3 billion invested in the PRIT pooled fund.
h. Derivatives
The System trades financial instruments with off‐balance‐sheet risk in the normal course of its investing activities to assist in managing exposure to market risks. The System uses forward foreign currency contracts to hedge against the risk of future foreign currency fluctuations.
i. Securities Lending
The Public Employment Retirement Administration Commission of Massachusetts (PERAC) has issued supplemental regulations that permit the System to engage in securities lending transactions. These transactions are conducted by the System’s custodian, which lends certain securities owned by the System to other broker dealers and banks pursuant to a form of loan agreement. The System and the borrowers maintain the right to terminate all securities lending transactions on demand.
At the System’s direction, the custodian lends the System’s securities and receives cash (including both U.S. and foreign currency), U.S. government securities, sovereign debt of foreign countries, and irrevocable bank letters of credit as collateral. The custodian does not have the ability to pledge or sell collateral unless the borrower defaults. Borrowers are required to deliver cash collateral in amounts equal to not less than 100% of the market value of the loaned securities.
The System does not impose any restrictions on the amount of securities lent on its behalf by the custodian. There were no failures by any borrowers to return loaned securities or pay distributions thereon and there were no losses from a default of the borrowers or the custodian for the year ended December 31, 2015. The cash collateral received by the custodian on each loan was invested, together with the cash collateral of other qualified tax‐exempt plan lenders, in a collective investment pool. The relationship between the average maturities of the investment pool and loans was affected by the maturities of the loans made by other plans that invested cash collateral in the collective investment pool, which the System could not determine. At December 31, 2015, the System had no credit risk exposure to borrowers because the amounts the System owed the borrowers exceeded the amounts owed to the System.
At December 31, 2015, the fair value of securities loaned by the System amounted to $254.6 million, against which was held collateral of $263.4 million as follows (in thousands):
Short‐term collateral investment pool $ 184,348
Noncash collateral 79,092
Total $ 263,440
j. Commitments
At December 31, 2015, the System had contractual commitments to provide $153.5 million of additional funding to private equity funds, and $72.7 million to real estate funds.
A‐46• City of Boston Basic Financial Statements
k. Fair Value Measurements
The Plan categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The Plan has the following recurring fair value measurements as of December 31, 2015 (in thousands).
Fair Value Measurements Using:Quoted Prices in SignificantActive Markets Other Significantfor Identical Observable Unobservable
Assets Inputs InputsTotal at December 31,
2015 (Level 1) (Level 2) (Level 3)
Short‐term:Domestic $ 64,793 $ 64,793 $ — $ —International 6,099 6,099 — —
Total short‐term 70,892 70,892 — —
U.S. equities:Large cap core 665,297 665,297 — —Large cap growth 95,501 95,501 — —Large cap value 70,886 70,886 — —Small cap core 69,284 69,284 — —Small cap growth 98,769 98,769 — —Small cap value 66,518 66,518 — —
Total U.S. equities 1,066,255 1,066,255 — — International equities 931,966 931,966 — —
Fixed income securities:
U.S. treasury securities 79,771 79,771 — — Corporate debt securities 503,609 139,497 364,112 —Global multi‐sector fixedincome 206,256 — 206,256 —Municipal 6,127 — 6,127 —Collateralized mortgageobligations 42,612 — 42,612 —Other asset backed securities 48,229 — 48,229 —U.S. Agencies 83,170 — 83,170 —
Total fixed income securities 969,774 219,268 750,506 —
PRIT fund 1,336,641 — 1,336,641
Total investments by fair valuelevel 4,375,528 2,288,381 2,087,147 —Investments measured at thenet asset value (NAV):
Hedge fund of funds 323,998Private equity funds 218,380Private real estate funds 415,693
Total investments measuredat the NAV 958,071
Total investments at fair value $ 5,333,599
Notes to Basic Financial Statements • A‐47
Fixed income and equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Fixed income securities classified in Level 2 of the fair value hierarchy are valued using a matrixpricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices.
The PRIT pooled fund is an external investment pool that is not registered with the Securities and Exchange Commission, but is subject to oversight provided by the Pension Reserves Investment Management Board (the PRIM board). The PRIM Board was created by legislation to provide general supervision of the investments and management of PRIT. PRIT is not a rated fund. The fair value of the PRIT pooled fund is based on unit value as reported by management of the PRIT pooled fund. The PRIT fund issues separately available audited financial statements with a year‐end of June 30. The Plan is required to provide a 30 day redemption notice for this investment.
The valuation method for investments measured at the net asset value (NAV) per share (or its equivalent) is presented on the following table (in thousands):
Investments Measured at the NAV
Unfunded Redemption Redemption Notice
Fair Value Commitments Frequency Period
Global multi‐strategy
hedge fund of funds1
$ 323,998 $ — Quarterly 60‐90 days
Real estate funds2
415,693 72,697 — —
Private equity funds3
218,380 153,497 — —
1. Global Multi‐strategy Hedge Fund of Funds. This type includes investments in 6 hedge funds that invest in other hedge fund managers. Management of each hedge fund is given full discretion to invest with direct hedge fund managers. The fair value of the investments in this type have been determined using the NAV per share of the investments.
2. Real Estate Funds. This type includes 29 real estate funds that invest primarily in U.S. commercial real estate. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the System’s ownership interest in partners’ capital. Distributions from each fund will be received as the underlying investments of the funds are liquidated. It is expected that the underlying assets of the funds will be liquidated over the next 7 to 10 years.
3. Private Equity Funds. This type includes 59 private equity funds that invest primarily in U.S. companies. These investments can never be redeemed with the funds; instead, the nature of the investments in this type is that distributions are received through the liquidation of the underlying assets of the funds. It is expected that the underlying assets of the funds will be liquidated over the next 7 to 10 years.
6. Property Taxes
Real and personal property taxes are based on values assessed as of each January 1. By law, all taxable property must be assessed at 100% of fair cash value. Also by law, property taxes must be levied at least 30 days prior to their due date. Once levied, these taxes are recorded as receivables, net of estimated uncollectible balances. Property tax revenues have been recorded using the accrual and modified accrual basis of accounting as described in note 2.
A‐48• City of Boston Basic Financial Statements
The City bills and collects its property taxes on a quarterly basis following the January 1 assessment. The due dates for those quarterly tax billings are August 1, November 1, February 1, and May 1. Property taxes that remain unpaid after the respective due dates are subject to penalties and interest charges.
Based on the City’s experience, most property taxes are collected during the year in which they are assessed. Liening of properties on which taxes remain unpaid occurs annually. On December 15, 2015, all properties with unpaid fiscal year 2015 property taxes were liened. The City ultimately has the right to foreclose on all properties where the taxes remain unpaid.
A statewide property tax limitation known as “Proposition 2‐1/2” limits the amount of increase in the property tax levy in any fiscal year. Generally, Proposition 2‐1/2 limits the total levy to an amount not greater than 2‐1/2 of the total assessed value of all taxable property within the City. Secondly, the tax levy cannot increase by more than 2‐1/2 of the prior year’s levy plus the taxes on property newly added to the tax rolls. Certain provisions of Proposition 2‐1/2 can be overridden by a citywide referendum.
7. Receivables
Receivables as of year‐end for the City’s individual major governmental funds and nonmajor governmental funds, including the applicable allowances for uncollectible accounts, are as follows (in thousands):
Other
Special Capital nonmajor
General revenue projects funds Total
Receivables:
Property taxes $ 13,183 $ — $ — $ — $ 13,183
Other taxes 104,438 — — — 104,438
Intergovernmental 42,415 54,698 12,050 — 109,163
Other 19,224 43,585 667 29,447 92,923
Gross
receivables 179,260 98,283 12,717 29,447 319,707
Less allowance for
uncollectibles (98,150) — — — (98,150)
Net totalreceivables $ 81,110 $ 98,283 $ 12,717 $ 29,447 $ 221,557
a. Long‐Term Receivable
The City participates in the Commonwealth’s school building assistance program, which is administered by the MSBA. The MSBA provides financial assistance (up to 80% of total costs) to the City to build and/or renovate schools. As of June 30, 2016, under this program funds totaling $21.0 million.
In the General Fund, the receivable is offset by deferred inflows of resources because the revenue is not considered available. The following is a schedule of the four‐year paydown (in thousands) as of June 30, 2017 through 2020:
Notes to Basic Financial Statements • A‐49
Anticipated
revenue
Fiscal year(s):
2017 $ 6,720
2018 6,720
2019 5,107
2020 2,462
Total $ 21,009
Notes Receivable
Section 108 is the loan guarantee provision of the Community Development Block Grant (CDBG) program. Section 108 provides communities with a source of financing for economic development, housing rehabilitation, public facilities, and large‐scale physical development projects. Housing and Urban Development (HUD) provides grants or loans to local governments, which in turn provides loans to developers. As of June 30, 2016, under this program, the City determined that $43.6 million was collectible. This amount is recorded in the City’s Special Revenue fund.
A‐50• City of Boston Basic Financial Statements
8. Capital Assets
Capital asset activity for the governmental activities for the year ended June 30, 2016 was as follows (in thousands):
Beginning Ending
balance Increases Decreases balance
Governmental activities:
Capital assets not being
depreciated:
Land $ 29,215 110 — 29,325
Construction in progress 96,537 162,784 (163,475) 95,846
Total capital assets not
being depreciated 125,752 162,894 (163,475) 125,171
Capital assets being depreciated:
Land improvements 219,195 37,665 — 256,860
Buildings and improvements 2,167,190 85,402 (128) 2,252,464
Furniture and equipment 382,267 40,039 (12,662) 409,644
Infrastructure 710,554 76,031 — 786,585
Total capital assets
being depreciated 3,479,206 239,137 (12,790) 3,705,553
Less accumulated depreciation for:
Land improvements 86,492 12,053 — 98,545
Buildings and improvements 1,124,265 46,745 (128) 1,170,882
Furniture and equipment 284,985 33,933 (12,648) 306,270
Infrastructure 251,029 22,665 — 273,694
Total accumulated
depreciation 1,746,771 115,396 (12,776) 1,849,391
Total capital assets
being depreciated, net 1,732,435 123,741 (14) 1,856,162
Governmental activities
capital assets, net $ 1,858,187 $ 286,635 $ (163,489) $ 1,981,333
Depreciation expense was charged to functions of the governmental activities as follows (in thousands):
General government $ 11,617
Human services 2,732
Public safety 17,257
Public works, including depreciation of general infrastructure assets 23,421
Property and development 9,385
Parks and recreation 11,120
Library 4,387
Schools 35,204
Public health 273
Total depreciation expense ‐ governmental activities $ 115,396
Notes to Basic Financial Statements • A‐51
9. Interfund Balances and Amounts Due To and From Component Units
Individual fund receivable and payable balances at June 30, 2016 are as follows (in thousands):
Interfund balances Receivable Payable
General $ 2,412 945
Special revenue 746 2,974
Non‐major governmental funds 6,401 5,640
Balances at June 30, 2016 $ 9,559 $ 9,559
The purpose of the internal balances is to fund cash flows due to timing differences between receipts and disbursements and to record amounts owed for rent related to the Dudley Municipal Center property.
Amounts due to and from discretely presented component units at June 30, 2016 are as follows (in thousands):
Discrete component unit balances Receivable Payable
Primary government:
General $ 8,615 2,978
Balances at June 30, 2016 8,615 2,978
Discretely presented component units:
TPL — 938
BPHC 2,978 457
BPDA — 7,220
2,978 8,615
Balances at June 30, 2016 $ 11,593 $ 11,593
A‐52• City of Boston Basic Financial Statements
10. Long‐Term Obligations
Governmental Activities
The following is a summary of the long‐term obligations of the governmental activities of the City as of June 30, 2016 (in thousands):
Outstanding,
Interest beginning of Outstanding, Due within
rates year Additions Reductions end of year one year
Bonds Payable:
General Obligation Bonds 2.0 ‐ 5.75% $ 805,655 140,000 74,780 870,875 71,390
General Obligation Refunding Bonds 0.125‐5.0% 413,950 8,100 44,265 377,785 44,175
Total governmental general obligation bonds
payable $ 1,219,605 148,100 119,045 1,248,660 115,565
Add (deduct):
Unamortized bond premiums/discounts net 131,136
Current portion of long‐term debt (115,565)
$ 1,264,231
Outstanding,Interest beginning of Outstanding, Due withinrates year Additions Reductions end of year one year
Notes, Leases and Other long‐term obligations:Notes payable 2.10‐7.18% $ 63,361 15,365 2,107 76,619 2,352 Leases payable 56,425 25,799 19,958 62,266 21,458 Judgments and claims 8,127 1,283 1,100 8,310 6,698 Tax abatements 18,800 — 2,400 16,400 5,200 Workers' compensation 156,230 23,815 14,130 165,915 42,489 Health and l ife claims 22,553 346,695 344,518 24,730 24,730 Compensated absences 196,467 75,956 72,081 200,342 58,168 Landfil l closure and postclosure carecosts 7,858 — 62 7,796 150 Pollution remediation 500 — — 500 — Other postemployment benefits 669,887 178,099 150,286 697,700 — Net pension l iabil ity 1,416,932 204,977 — 1,621,909 —
Total notes, leases, and other
long‐term obligations $ 2,617,140 871,989 606,642 2,882,487 161,245
The payment of long‐term obligations of the governmental activities, except for health and life claims, is the responsibility of the City’s General Fund. Health and life claims are the responsibility of the City’s Internal Service Fund.
Notes to Basic Financial Statements • A‐53
The annual debt service requirements of the City’s general obligation bonds, notes and leases payable as of June 30, 2016, including subsidies to be received for Build America Bonds and Qualified School Construction Bonds, are as follows (in thousands):
General Obligation Bonds: Principal Interest Subsidy Total
Year(s) ending June 30:
2017 $ 115,565 59,074 (3,254) 171,385
2018 110,365 52,902 (3,180) 160,087
2019 104,470 43,083 (3,113) 144,440
2020 94,335 38,710 (3,034) 130,011
2021 91,610 34,170 (2,951) 122,829
2022‐2026 427,070 108,726 (9,291) 526,505
2027‐2031 212,205 37,469 (690) 248,984
2032‐2036 93,040 7,194 — 100,234
$ 1,248,660 $ 381,328 $ (25,513) $ 1,604,475
Notes Payable:
Year(s) ending June 30:
2017 $ 2,352 1,273 — 3,625
2018 5,447 1,188 — 6,635
2019 1,661 1,102 — 2,763
2020 1,801 1,075 — 2,876
2021 1,677 1,032 — 2,709
2022‐2026 12,350 4,237 — 16,587
2027‐2031 14,046 3,096 — 17,142
2032‐2036 17,840 1,118 — 18,958
Thereafter 19,445 1,374 — 20,819
$ 76,619 $ 15,495 $ — $ 92,114
Leases Payable:
Year(s) ending June 30:
2017 $ 21,458 713 — 22,171
2018 16,415 479 — 16,894
2019 12,199 288 — 12,487
2020 6,325 149 — 6,474
2021 3,291 75 — 3,366
2022‐2023 2,578 47 — 2,625
$ 62,266 $ 1,751 $ — $ 64,017
On March 24, 2016, the City issued $148.1 million of general obligation and refunding bonds, including $140.0 million for various municipal capital projects and $8.1 million of refunding bonds for the purpose of refunding certain outstanding general obligation bonds of the City totaling $9.2 million. Interest on the bonds are payable semiannually each April 1 and October 1 until maturity in fiscal years 2027 and 2036, respectively.
The cash flow difference and economic gain (the difference between the present value of the debt service payments and old and new debt) obtained from the March 24, 2016 refunding were $1.1 million and $0.9 million, respectively.
The City has entered into various capital lease agreements for equipment acquisition. Payments under these
A‐54• City of Boston Basic Financial Statements
agreements are subject to annual appropriation and, by statute, are not included in the City’s debt limit calculations. The gross amount of assets acquired under the equipment lease agreements totals $62.3 million as of June 30, 2016. The City’s operating lease with DSRC is described in note 19.
No Obligation Debt
The City has outstanding industrial, commercial, and housing development bonds payable solely from revenues of the respective enterprises that do not constitute an indebtedness of the City and are not charged against its general credit. This aggregate amount is immaterial to the financial statements.
Defeased Debt
The principal amount of debt refunded through in‐substance defeasance transactions for governmental activities and still outstanding at June 30, 2016 was approximately $144.2 million.
Debt Capacity
The City is subject to a dual general debt limit: the normal debt limit and the double debt limit. Such limits are equal to 5% and 10%, respectively, of the valuation of taxable property in the City as last equalized by the Massachusetts Department of Revenue. Debt may be authorized up to the normal debt limit without state approval. Authorizations under the double debt limit, however, require the approval of the Commonwealth’s Secretary of Administration and Finance. Additionally, there are many categories of general obligation debt, which are exempt from the debt limit but are subject to other limitations.
As of June 30, 2016, the City may issue $3.73 billion of additional general obligation debt under the debt limit. General obligation debt of $680.8 million, subject to the debt limit, and $75.7 million, exempt from the debt limit, are authorized but unissued as of June 30, 2016.
11. Retirement Plans
a. Plan Description
The City contributes to the BRS, a cost‐sharing, multiple‐employer qualified defined benefit governmental pension plan. The System provides retirement, disability, and death benefits to plan members and beneficiaries of the following government units:
(1) City of Boston
(2) Boston Planning & Development Agency
(3) Boston Housing Authority
(4) Boston Water and Sewer Commission
(5) Boston Public Health Commission
(6) Sheriff of Suffolk County (Retirees as of December 31, 2009, funded by the City)
The Commonwealth of Massachusetts also is an other contributing entity and makes contributions to BRS related to City of Boston teachers.
Notes to Basic Financial Statements • A‐55
The System is administered by a five person Board of Retirement consisting of the City Auditor, who serves as a member ex officio, two members who are elected by the participants, in or retired from the service of the System, a fourth member appointed by the Mayor, and a fifth member chosen by the other members. A complete set of financial statements for BRS for the fiscal year ended December 31, 2015 can be obtained through the BRS, Boston City Hall, Room 816, Boston, MA 02201 or by accessing the websitewww.cityofboston.gov/retirement/investment.asp.
Participation in the System is mandatory for all permanent, full time, and certain part‐time employees immediately upon the commencement of employment. Participants who resign from employment, or are receiving workers’ compensation benefits, and who are not eligible to receive a retirement allowance are entitled to request a refund of their accumulated total deductions. In addition, those participants who resign voluntarily with less than ten years of service are entitled to receive 3% per year interest; all others receive interest which has accrued on their cumulative deductions at the regular interest rate (0.1% at December 31, 2015).
Employees with ten or more years of service having attained age 55 are entitled to pension benefits; an earlier retirement is allowed upon completion of 20 years of service. The System provides for retirement allowance benefits up to a maximum of 80% of a participant’s highest consecutive three‐year average annual rate of regular compensation (highest consecutive five‐year average for those members who join the System on or after April 2, 2013). Benefit payments are based upon a participant’s age, length of creditable service, regular compensation, and group classification. Participants become vested after ten years of creditable service. Effective July 1, 1998 Chapter 32 of the M.G.L. assigned the authority to establish and amend benefit provisions and grant cost‐of‐living increases for the plan to the Boston Retirement Board.
If a member in service dies due to causes unrelated to his or her job, the surviving spouse and/or surviving dependent children may receive benefits, either in a lump sum or in the form of an annuity based on the length of service, contributions and age. In the event there are no spouse and/or dependent children named, other beneficiaries may be entitled to a lump‐sum distribution. Participants who become permanently and totally disabled from further duty may be eligible to receive accidental or ordinary disability retirement benefits.
Accidental disability is provided to members with incapacitation resulting from a work‐related injury or hazard. Generally, annual pension benefits are provided based on 72% of the annual rate of regular compensation a member earned while an active employee on date of injury or average annual rate of regular compensation. Ordinary disability is available to any member whose permanent incapacitation is not work‐related and has attained ten years of creditable service. Such benefits are provided as if the member had attained the age of 55 (or actual age if over 55) based on the amount of creditable service actually earned. Limits are placed on how much a disability employee can earn from other sources while collecting a disability retirement pension.
The City is legally responsible for funding the employer portion of all pensions associated with certain retirees from the Suffolk County Sheriff’s Department (SCSD), which became part of the Commonwealth of Massachusetts in 2010, pursuant to a cooperation agreement (the Agreement) dated June 28, 2011. According to the Agreement, all employees of the SCSD, or its predecessor department, who retired prior to January 1, 2010 remained retirees of the BRS. In addition, members of AFSCME Local 419 who retired between January 1, 2010 and October 31, 2010, remained retirees of the BRS. Employer contributions related to these retirees are the responsibility of the City under the Agreement.
A‐56• City of Boston Basic Financial Statements
Special Funding Situations
The City is party to a special funding situation with the Commonwealth of Massachusetts with respect to City of Boston Teachers. The Commonwealth is responsible for funding the employer portion of all teacher pensions in the Commonwealth. All teachers in the Commonwealth are members of the Massachusetts Teachers Retirement System, with the exception of teachers employed by the City, who are members of BRS. Although Boston Teachers are members of BRS, the Commonwealth is the responsible contributing entity as described in Chapter 112 of the Massachusetts General Laws Acts of 2010.
The Commonwealth is also legally responsible for reimbursing BRS for a portion of the benefits payments for cost of living increases granted before July 1997 as described in Chapter 112 of the Massachusetts General Laws Acts of 2010.
b. BRS Basis of Accounting
The System’s financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions are recognized as additions in the period when they become due pursuant to formal statutory obligations. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.
Investments are reported at fair value. The following is a description of the valuation techniques and inputs used for each major class of assets and liabilities measured at fair value:
(1) Short‐term, Equity and Fixed Income Investments ‐ Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Certain fixed income securities not traded on an exchange are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices. (2) Pooled funds ‐ the fair value of shares in managed investment pools is based on unit values reported by the funds. (3) Alternative investments include hedge funds, holding through commingled limited partnerships of venture capital funds, including equity interests in early, middle, and later stage companies, as well as debt and equity interests in buyouts, acquisitions, restructurings, mezzanine structures and special situations, such as litigation or spin‐off activities. These investments are carried at the limited partnership interest or redemption value, the equivalent of net asset value, which approximates fair value. Values assigned to such investments are based on available information and do not necessarily represent amounts that may ultimately be realized in liquidation. Liquidation values depend largely on future circumstances, including marketability, and frequently cannot reasonably be estimated until at, or near, the liquidation date. (4) Real estate investments consist of interests in commercial properties held by various partnerships and other limited liability entities, some of which utilize debt financing. Fair values of such holdings are reported based on the net asset values of the entities, which are estimated using third‐party appraisals and other information provided by property managers.
Notes to Basic Financial Statements • A‐57
c. Membership
Membership in the System consisted of the following at December 31, 2013, the date of the latest actuarial valuation:
Active plan members 20,278
Retirees and beneficiaries receiving benefits 14,341
Inactive members entitled to a return of contributions 7,983
Inactive members entitled to, but not yet receiving benefits 808
Total membership 43,410
Total number of participating employers 6
d. Contributions
Plan members are required to contribute to the System. Depending on their employment date, active members must contribute a range of 5%–11% of their regular gross compensation. Non‐teacher members hired after January 1, 1979 must contribute an additional 2% of regular compensation in excess of $30,000. Participating employers are required to pay into the System their share of the remaining System‐wide actuarially determined contribution, which is apportioned among the employers based on an actuarial computation. The contributions of plan members and the participating employers are governed by Chapter 32 of the M.G.L. For the year ended December 31, 2015, the System was due $339.2 million from all employers and the Commonwealth and received $339.2 million in these contributions. For the year ended June 30, 2016, inclusive of contributions related to SCSD, and exclusive of contributions related to the City’s teachers, the City’s required and actual contribution was $179.5 million. For the year ended June 30, 2016, the Commonwealth’s required and actual contribution related to City Teachers was $120.4 million. The amount is reported as intergovernmental revenue and retirement cost expenditures in the General Fund.
e. Legally Required Reserve Accounts
The balance in the System’s legally required reserves (on the statutory basis of accounting) at December 31, 2015 is as follows (in thousands):
Description Amount Purpose
Annuity savings fund $ 1,638,152 Active members' contribution balance
Annuity reserve fund 455,559 Retired members' contribution account
Military service fund 50 Members' contribution account while on military
leave
Pension reserve fund 3,364,918 Amounts appropriated to fund future retirement
benefits
Pension fund 100,614 Remaining net position
$ 5,559,293
All reserve accounts are funded at levels required by state statute.
A‐58• City of Boston Basic Financial Statements
f. City Pension Liabilities, Pension Expense, and Deferred Outflows of Resources Related to Pensions
At June 30, 2016, the City reported a liability of $1.62 billion for its proportionate share of the BRS net pension liability measured as of December 31, 2015. This net pension liability includes amounts related to SCSD retirees and reflects a reduction for the special funding situations with the Commonwealth. The amount recognized by the City as its proportionate share of the net pension liability, the proportionate share related to the Commonwealth special funding situations, and the total portion of the net pension liability associated with the City measured at December 31, 2015 were as follows (in thousands):
City's proportionate share of net pension liability $ 1,621,909
Commonwealth's proportionate share of net pension liability
associated with the City 2,425,659
Total $ 4,047,568
To determine employers' proportionate share of the net pension liability, separate calculations of net pension liability were performed for each of the Commonwealth special funding situations, SCSD retirees, and the remaining non‐teacher group. At December 31, 2015, the City was allocated 100% of the net pension liability for SCSD retirees and 81.71% of the remaining non‐teacher group based on its proportion of 2015 required employer contributions related to this group. The City’s proportion of the collective BRS net pension liability at December 31, 2015 was 36.78% compared to 36.82% at December 31, 2014.
For the year ended June 30, 2016, in the Government‐wide financial statements, the City recognized pension expense of $462.8 million and revenue of $236.5 million related to the Commonwealth special funding situations. At June 30, 2016, the City reported deferred outflows of resources related to pensions from the following sources (in thousands):
Deferred
outflows of Deferred inflows
resources of resources
Net difference between projected and actual investment
earnings $ 297,346 $ —
Changes in assumptions 4,954 62,565
Changes in employer proportion 24,335 —
$ 326,635 $ 62,565
Amounts reported as deferred outflows of resources and deferred inflows of resources at June 30, 2016 related to pensions will be recognized in pension expense as follows (in thousands):
Year ended June 30:
2017 $ 73,940
2018 73,940
2019 73,940
2020 51,981
2021 (9,731)
$ 264,070
Notes to Basic Financial Statements • A‐59
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the BRS and additions to/deductions from the BRS’s fiduciary net position have been determined on the same basis as they are reported for the BRS.
g. Actuarial Assumptions
The total pension liability for the December 31, 2015 measurement date was determined by using an actuarial valuation as of December 31, 2013, with updated procedures used to roll forward the total pension liability to December 31, 2015. The measurement at December 31, 2015 applied the following actuarial assumptions:
Inflation 3.25% for BRS excluding teachers and 4.5% for teachers
Salary Scale 7.5% to 4% percent, indexed by year of service, for teachers
and 4.5% to 4% for non‐teachers
Investment rate of return, 7.75% for BRS excluding teachers and 7.5% for teachers,
including inflation net of expenses, including inflation
Cost of living adjustments 3 % of first $13,000
Mortality RP‐2000 mortality tables projected using scale BB2D for BRS excluding teachers, and
RP‐2014 mortality tables projected using scale BB2D for teachers
The salary scale for non‐teachers indicated above was a reduction from a range of 5.0% to 4.5% used in the measurement of the total pension liability as of December 31, 2014. Additionally, the investment rate of return of 7.5% for teachers indicated above was a reduction from the 8.0% used in the December 31, 2014 measurement.
The long‐term expected rate of return on pension plan investments was determined using a building‐block method in which best‐estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long‐term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.
Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of the actuarial valuation date of December 31, 2013 for BRS, excluding Teachers, are summarized below:
Long‐term
expected
Target real rate of
Asset class allocation return
Domestic equity 25% 6.49%
International developed markets equity 19 7.16
Emerging markets equity 8 9.46
Core fixed income 11 1.68
High yield fixed income 13 4.76
Real estate 10 4.37
Hedge fund, GTAA, Risk parity 7 3.60
Private equity 7 11.04
100%
A‐60• City of Boston Basic Financial Statements
h. Discount Rate
The discount rate used to measure the total pension liability was 7.75% for BRS excluding Teachers. The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rate and that contributions of participating employers and the Commonwealth will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the BRS's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long‐term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
i. Sensitivity of the City’s Proportionate Share of the BRS Net Pension Liability
The following presents the City’s proportionate share of the BRS net pension liability calculated using the discount rate of 7.75% for the BRS excluding Teachers, as well as what the City’s proportionate share of the BRS net pension liability would be if it were calculated using a discount rate that is 1‐percentage‐point lower (6.75%) or 1‐percentage‐point higher (8.75%) than the current rate for BRS excluding Teachers (in thousands):
City's net pension liability
1% Decrease Current Discount 1% Increase
(6.75)% Rate (7.75%) (8.75)%
June 30, 2016 $ 2,185,286 $ 1,621,909 $ 1,145,392
12. Other Postemployment Benefits (OPEB)
GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, requires governments to account for OPEB, primarily healthcare, on an accrual basis. The effect is the recognition of an actuarially required contribution as an expense on the Government‐wide Statement of Activities when a future retiree earns their postemployment benefit. To the extent that an entity does not fund their actuarially required contribution, a postemployment benefit liability is recognized on the Government‐wide Statement of Net Position over time. OPEB benefits are reported as expenditures on a pay‐as‐you‐go basis in the governmental funds.
In addition to the pension benefits described in note 11, the City provides postemployment healthcare and life insurance benefits, in accordance with state statute and City ordinance, to participating retirees and their beneficiaries. Participating retirees are City retirees. As of June 30, 2015, the most recent actuarial valuation date, approximately 14,700 retirees and 14,300 active members meet the eligibility requirements as put forth in Chapter 32B of M.G.L. The City sponsors and participates in an agent multi‐employer defined benefit OPEB plan. The Boston Public Health Commission, a discretely presented component unit, also participates and contributes to the plan. The OPEB plan is administered by the City and does not issue a stand‐alone financial report.
Medical and prescription drug benefits are provided to all eligible retirees not enrolled in Medicare through a variety of plans offered by Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim HealthCare, and Neighborhood Health Plan. Medical and prescription drug benefits are provided to retirees enrolled in Medicare through supplemental and Medicare Advantage plans offered by Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim HealthCare, and Tufts Health Plan.
Groups 1 and 2 retirees, including teachers, with at least 10 years or 20 years of creditable service are eligible at age 55 or any age, respectively. Group 4 retirees with at least 10 years or 20 years of creditable service are eligible at age 45 or any age, respectively. Retirees on accidental disability retirement are eligible at any age, while ordinary disability requires 10 years of creditable service. The surviving spouse is eligible to receive pre and postretirement death benefits, as well as medical and prescription drug coverage.
Notes to Basic Financial Statements • A‐61
a. Funding Policy
Employer and employee contribution rates are governed by the respective collective bargaining agreements. The OPEB Plan is currently funded on a pay‐as‐you‐go basis plus periodic advance funding contributions as amounts are available. The employers and plan members share the cost of benefits. As of June 30, 2015, the valuation date, the plan members contribute 11% to 28.50% of the monthly premium cost, depending on the plan in which they are enrolled. The City contributes the balance of the premium cost.
b. Basis of Accounting
The OPEB Trust Fund is prepared using the accrual basis of accounting. Employer contributions to the plan are recognized when made. Benefits are recognized when due and payable in accordance with the terms of each plan.
Investments are reported at fair value. Fair value of securities held directly are based on quotations from national securities exchanges.
c. Annual OPEB Cost and Net OPEB Obligation
The City’s annual OPEB expense is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liability over a period of 30 years. The following table shows the components of the City’s annual OPEB cost for the year ended June 30, 2016, the amount actually contributed to the plan, and the change in the City’s net OPEB obligation based on an actuarial valuation as of June 30, 2015 (in thousands):
ARC $ 162,018
Interest on net OPEB obligation 46,892
Adjustment to ARC (30,811)
Annual OPEB cost 178,099
Contributions made (150,286)
Change in net OPEB obligation 27,813
Net OPEB obligation ‐ beginning of year 669,887
Net OPEB obligation ‐ end of year $ 697,700
The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows (in thousands):
Percentage ofOPEB Cost Net OPEB
Fiscal Year Ended Annual OPEB Cost Contributed Obligation
2016 $ 178,099 84% $ 697,700 2015 175,602 92% 669,887 2014 170,249 90% 656,343
A‐62• City of Boston Basic Financial Statements
d. Funded Status and Funding Progress of the Plan
The funded status of the OPEB plan in the aggregate and the City’s individual OPEB Plan as of the most recent actuarial valuation at June 30, 2015 was as follows (in thousands):
Plan City
AAL $ 2,597,763 $ 2,489,239
Actuarial value of plan assets 335,205 324,261
UAAL $ 2,262,558 $ 2,164,978
Funded ration (actuarial value of plan assets/AAL) 12.90% 13.03%
Covered payroll (active plan members) $ 1,366,047 $ 1,304,331
UAAL as a percentage of covered payroll 166% 166%
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the City are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the Notes to Financial Statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
e. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the City and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the City and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short‐term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long‐‐term perspective of the calculations.
The most recent actuarial valuation was performed as of June 30, 2015. The projected unit credit cost method was used. The actuarial assumptions included a 7.0% investment rate of return, an inflation rate of 4.5% and an annual healthcare cost trend rate of 7.0 ‐ 8.0% initially, reduced by decrements to an ultimate rate of 5.0% after 5 – 6 years. The actuarial value of assets was determined using the fair value of investments. The healthcare cost trend rate differs between the master medical and other healthcare plans. The City’s UAAL is being amortized as a level percentage of pay on an open basis. The remaining amortization period at July 1, 2015 was 30 years.
13. Transfers
Transfers and their purposes during the year ended June 30, 2016 were as follows (in thousands):
Governmental funds
Special Capital OtherGeneral revenue projects governmental
Primary government:
Parking Meter Fees $ — $ (6,500) $ 6,500 $ —
Debt Service (1,455) — — 1,455
Total $ (1,455) $ (6,500) $ 6,500 $ 1,455
Notes to Basic Financial Statements • A‐63
14. Excess of Expenditures over Budgets
The City had expenditures in excess of their budgeted amounts for the year ended June 30, 2016 in the following categories (in thousands):
Public safety:
Police Department $ 16,343
Fire Department 3,195
Judgments and Claims:
Execution of courts 6,954
$ 26,492
The excess expenditures reported above are allowed under the budgetary laws governing the City.
A‐64• City of Boston Basic Financial Statements
15. Fund Balance Classification Details
The components of fund balance for the City’s governmental funds as of June 30, 2016 are as follows (in thousands):
OtherSpecial Capital governmental
Fund Balances: General Revenue Projects funds
Nonspendable
Permanent fund principal $ — — — 4,974
Subtotal — — — 4,974
Restricted for:
General government — — 24,234 1,475
Human services — — 1,821 —
Public safety — — 10,106 —
Public works — — 3,547 —
Property and development — 43,585 10,509 32,918
Parks and recreation — — 2,462 39,357
Library — — — —
Schools — — 26,304 8,492
Subtotal — 43,585 78,983 82,242
Assigned to:
General government 4,186 6,110 — —
Human services 704 — — —
Police 6,781 — — —
Fire 3,106 — — —
Other public safety 896 127,540 — —
Public works 736 — — —
Property and development 2,843 51,378 — —
Parks and recreation 504 2,224 — —
Library 324 150 — —
Schools 24,868 15,732 — —
Boston Public Health Commission 2,209 — — —
Judgments and claims 29,354 — — —
Catastrophic loss 31,112 — — —
Housing initiative 8,550 — — —
Debt service 7,163 — — —
Employee related costs 63,500 — — —
Designated for subsequent year expense 79,386 — — —
Subtotal 266,222 203,134 — —
Unassigned 682,781 — — —
Total fund balances $ 949,003 246,719 78,983 87,216
Notes to Basic Financial Statements • A‐65
16. Commitments and Contingencies
The City has committed $76.5 million in encumbrances for purchase orders, contracts, and judgments and claims in the General Fund, $55.6 million in the Special Revenue Fund, $185.6 million in the Capital Projects Fund, and $287 thousand in Other Governmental Funds.
Infrastructure Investment Incentive Transactions
Infrastructure Investment Incentive transactions (I‐Cubed) are governed by Chapter 293 of the Acts of 2006 (the Act). Under the Act, the funding for the projects associated with these transactions is provided through proceeds of bonds issued by the Massachusetts Development Finance Agency (MDFA) and is to be used for approved public infrastructure improvements undertaken by the developer. The debt service on these bonds will be paid by the Commonwealth through State Infrastructure Development Assistance to the extent that New State Tax Revenues generated once the project is operational offset the amounts paid to MDFA to cover the debt service. When this is not the case, the participating municipality or developer generally will be responsible for the shortfall depending on the transaction agreement. The Act provides for the establishment of a Municipal Liquidity Reserve (MLR) from which the participating municipality can draw to offset any required payments made to the Commonwealth. The MLR is generally funded by the developer either through cash or a direct pay letter of credit.
During fiscal year 2015, the City executed two Infrastructure Development Assistance Agreements (IDAA) for I‐Cubed transactions. Under the first IDAA, $32.4 million in bonds were issued by MDFA in September 2015. Also, an MLR of $1.2 million was established at the time of the issuance of the bonds. This reserve is equal to twice the maximum annual debt service payable in any fiscal year on the bonds issued under the indenture. The City is obligated for any shortfalls between debt service on the bonds and New State Tax Revenues. However, it has the right to assess the developer or draw from the MLR for any payments on such obligations. The City had no obligation for any shortfalls at June 30, 2016. The City also recorded $11.2 million in donated capital assets in fiscal year 2016 for improvements to City‐owned infrastructure made by the developer. These assets have been recorded at acquisition value which has been defined as "the price that would be paid to acquire an asset with equivalent service potential in an orderly market transaction at the acquisition date."
Under the second IDAA, $10.0 million in bonds were issued by MDFA in fiscal year 2016. The City is obligated for any shortfalls between debt service on the bonds and New State Tax Revenues. However, it has the right to assess the developer or draw from the MLR for one‐third of any payments on such obligations. The City had no obligation for any shortfalls at June 30, 2016.
In connection with this second I‐Cubed transaction, the City has a leasehold interest in a portion of the parking garage, which represents the public infrastructure improvements under the transaction, created under a master lease and its assignments and a sublease. With the execution of the master lease and sublease agreements, along with the assignment agreements transferring the interests of the owner of the parking garage to the City through the BPDA, the City essentially becomes the lessee on the master lease and the sub‐landlord on the sublease. This results in the City having no responsibility for the operation of the parking garage and having the right to collect from the sub‐lessee Section 121A PILOT payments from 2015 through 2036 and then base rent from 2036 through 2055, both of which are largely based on a percentage of gross revenues of the parking garage. The City has no obligation for any payments as lessee under the master lease.
17. Public Health System
Effective July 1, 1996, the City’s Department of Health and Hospitals and Trustees of Health and Hospitals were abolished. Substantially all their assets and liabilities, including title to the City’s two hospitals, BCH and Boston Specialty and Rehabilitation Hospital (BSRH), were transferred to and assumed by BPHC.
A‐66• City of Boston Basic Financial Statements
Also effective July 1, 1996, the operations of BCH and BSRH were consolidated with the operations of the Boston University Medical Center under the licensure and control of the BMC.
The BPHC receives the majority of its funding from federal and state grants, and a City appropriation. During fiscal year 2016, the City appropriated $76.2 million to the PHC. As described below, the BPHC uses the appropriation to pay debt service on certain general obligation bonds, for administrative purposes and to support the various public health programs run by the PHC. The City has budgeted $77.3 million for the BPHC for fiscal year 2017.
Due from BPHC/BMC
General obligation bonds issued by the City between December 1967 and October 1995, for which BPHC was responsible for repayment, have been fully repaid as of June 30, 2016. These bonds pertained to the property and operations of the BCH Campus, South Block Campus, BSRH Campus, Emergency Medical Services Operations, and the Long Island Campus.
In addition, the BPHC is also responsible for reimbursing the City for health insurance, equipment lease payments, workers’ compensation, and other miscellaneous expenses paid for by the City.
18. Risk Management
The Risk Management Program focuses on a planned strategy of self‐insurance, supported by strong prevention and cost reduction efforts, financial reserves and catastrophic insurance. The City is self‐insured in most areas of risk including general liability, property and casualty, workers’ compensation, certain employee health care costs and unemployment compensation.
The City’s legal liabilities are capped per M.G.L. Chapter 258, and Corporation Counsel defends the City in any lawsuits that arise from the normal course of operations. For workers’ compensation, the City is exempt from state insurance requirements per M.G.L. Chapter 152 Section 25B. The City’s Workers’ Compensation Division, as well as the Police and Fire Departments, manage employee injury claims internally. The City budgets for and funds legal claims and employee injury costs through the General Fund, charging specific departments for their share of costs in order to promote awareness and prevention efforts.
The City provides health insurance coverage for employees and retirees through a variety of insured and self‐insured plans. The City budgets for and funds the premium costs for all plans through the General Fund. Self‐insured plans are financially managed through the Internal Service Fund established in compliance with M.G.L. Chapter 32B, Section 3A. In fiscal year 2013, a guiding policy for the more prudent management of the City of Boston Health Claims Trust Fund was established. This policy states that accounting for the fund will be in accordance with generally accepted accounting principles, and will ensure that all contributions and actual costs are shared between employers and their subscribers according to predetermined ratios.
For unexpected large losses, the City maintains a catastrophic risk reserve, which has an available balance of $31.1 million at the end of fiscal 2016. To further protect the City’s assets and finances from adverse loss, commercial insurance is purchased strategically for certain exposures. A catastrophic property insurance policy provides $100.0 million for all risk protection after a $10.0 million deductible. Boiler and machinery losses are insured up to $25.0 million per incident, after a $50 thousand deductible.
Notes to Basic Financial Statements • A‐67
The City has established a liability based on historical trends of previous years and attorneys’ estimates of pending matters and lawsuits in which the City is involved. Changes in the self‐insurance liability for the fiscal years ended June 30, 2016 and 2015 are as follows (in thousands):
Internal service fund
2016 2015
Health and life claims, beginning of year $ 22,553 $ 24,312
Incurred claims 346,695 321,873
Payments of claims attributable to events of both thecurrent and prior fiscal years:
Health and life (344,518) (323,632)
Health and life claims, end of year $ 24,730 $ 22,553
Government‐wide statements
2016 2015
Judgments and claims, beginning of year $ 183,157 $ 162,038
Incurred claims 28,747 45,912
Payments of claims attributable to events of both the currentand prior fiscal years:
Workers' compensation (14,130) (13,686)
Unemployment compensation (3,649) (4,886)
Tax abatement liability (2,400) (700)
Court judgments (1,100) (5,521)
Judgments and claims, end of year $ 190,625 $ 183,157
The liabilities above have not been discounted to their present value. Incurred claims represent the total of a provision for events of the current fiscal year and any change in the provision for events of the prior fiscal years.
There are numerous pending matters and lawsuits in which the City is involved. The City attorneys’ estimate that the potential claims against the City not recorded in the accompanying basic financial statements resulting from such litigation would not materially affect the basic financial statements.
19. Dudley Square Realty Corporation (DSRC) and Ferdinand Building Development Corporation (FBDC)
As described in note 1, the DSRC is a Qualified Active Low‐Income Community Business, and is the owner and developer of the Dudley Municipal Center property. FBDC is the leverage lender of the Dudley Municipal Center property. As the project sponsor during fiscal year 2013, the City authorized and issued $28.9 million in general obligation bonds and transferred proceeds to FBDC. FBDC, utilizing these bond proceeds, made loans totaling $29.3 million to two investment funds. As of June 30, 2016, $29.3 million is due to FBDC on such loans. The investment funds made these proceeds and funds from additional investments available to eight leverage lenders that made loans in the aggregate amount of $40.8 million to DSRC to finance the Dudley Municipal Center project. This amount is recorded in the City’s Notes and Leases Payable line of note 10. With the completion of the Dudley Municipal Center project, FBDC is the master tenant and leases the project from DSRC.
A‐68• City of Boston Basic Financial Statements
FBDC subleases the majority of space of the project to the City. The schedule of payments is the same in the lease and the sublease as follows (in thousands):
Year(s) ending June 30: Lease payments
2017 $ 551
2018 551
2019 595
2020 638
2021 638
2022‐2026 8,062
2027‐2031 10,150
2032‐2036 10,150
2037‐2041 10,150
2042‐2046 10,150
2047 3,045
Total $ 54,680
20. Discretely Presented Component Units
The following presents condensed financial statements for each of the discretely presented component units:
Condensed Statements of Net Position
June 30, 2016
(in thousands)
BPHC BPDA TPL EDIC Total
Assets:
Current assets:
Cash and investments $ 30,228 $ 28,836 $ 2,585 $ 8,990 $ 70,639
Cash and investments held
by trustee — — 12,050 — $ 12,050
Receivables, net:
Other 28,656 14,622 1,155 8,478 $ 52,911
Other assets 27 — 19 1,031 $ 1,077
Due from primary
government 2,978 — — — 2,978
Total current assets 61,889 43,458 15,809 18,499 139,655
Noncurrent assets:
Cash and investments held
by trustee — — 54,782 — 54,782
Notes receivable 41,934 135,074 50 — 177,058
Capital assets:
Nondepreciable 12,087 9,534 150 3,094 24,865
Depreciable 14,433 4,204 672 34,309 53,618
Total noncurrent
assets 68,454 148,812 55,654 37,403 310,323
Total assets 130,343 192,270 71,463 55,902 449,978
Deferred outflows of resources:
Deferred amount for
pension costs 28,572 3,805 — — 32,377
Notes to Basic Financial Statements • A‐69
Condensed Statements of Net Position
June 30, 2016
(in thousands)
BPHC BPDA TPL EDIC Total
Liabilities:
Current liabilities:
Warrants and accounts
payable $ 19,184 $ 4,412 $ 932 $ 3,703 $ 28,231
Accrued liabilities:
Other 311 549 394 1,959 3,213
Current portion of
long‐term debt and leases 945 — — 782 1,727
Due to primary government 457 — 938 — 1,395
Unearned revenue 2,819 1,980 145 440 5,384
Total current
liabilities 23,716 6,941 2,409 6,884 39,950
Noncurrent liabilities:
Bonds notes and leases due
in more than one year $ 3,017 $ 3,268 $ — $ 12,177 $ 18,462
Other noncurrent liabilities 1,640 138,316 — 682 140,638
OPEB 86,075 5,770 — — 91,845
Unearned revenue 42,978 24,073 — — 67,051
Net pension liability 150,750 20,096 — — 170,846
Due to primary government — 7,220 — — 7,220
Total noncurrent
liabilities 284,460 198,743 — 12,859 496,062
Total liabilities 308,176 205,684 2,409 19,743 536,012
Deferred inflows of resources:
Deferred amount for
pension costs 11,734 2,300 — — 14,034
Net position:
Net investment in capital assets 22,558 10,723 822 24,443 58,546
Restricted — — 66,015 704 66,719
Unrestricted (183,553) (22,632) 2,217 11,012 (192,956)
Total net position $( 160,995) $ ( 11,909) $ 69,054 $ 36,159 $ ( 67,691)
A‐70• City of Boston Basic Financial Statements
Condensed Statements of Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2016
(in thousands)
BPHC BPDA TPL EDIC Total
Expenses $ 187,942 $ 24,677 $ 11,951 $ 38,564 $ 263,134
Program revenues:
Charges for services 43,886 10,215 1,645 21,542 77,288
Operating grants and
contributions 48,263 12,349 6,545 17,035 84,192
Capital grants and contributions 415 — — — 415
Total program
revenues 92,564 22,564 8,190 38,577 161,895
Net expenses (95,378) (2,113) (3,761) 13 (101,239)
General revenues:
Investment income 35 20 (7) 1 49
Sale of property — 2,539 — — 2,539
City appropriation 81,682 — — — 81,682
Miscellaneous income 5,517 — 1,341 31 6,889
Total general
revenues 87,234 2,559 1,334 32 91,159
Change in net position (8,144) 446 (2,427) 45 (10,080)
Net position ‐ beginning of year (152,851) (12,355) 71,481 36,114 (57,611)
Net position ‐ end of year $ (160,995) $ (11,909) $ 69,054 $ 36,159 $ (67,691)
Required Supplementary Information •A‐71
RequiredSupplementaryInformation(Unaudited)(Amounts in thousands)
Schedules of Funding Progress ‐ Other Postemployment Benefits
Actuarial UAAL as a
Actuarial Actuarial accrued Unfunded Funded percentage of
valuation value of liability AAL (UAAL) ratio Covered covered payroll
date assets (a) (AAL) (b) (b‐a) (a/b) payroll (c) ((b‐a)/c)
OPEB ‐ City
06/30/15 $ 324,261 2,489,239 2,164,978 13.03% $ 1,304,331 166.0%
06/30/13 204,567 2,257,699 2,053,132 9.06 1,021,081 201.1
06/30/11 109,736 2,595,942 2,486,206 4.23 1,045,488 237.8
OPEB ‐ Plan
06/30/15 $ 335,205 2,597,763 2,262,558 12.90% $ 1,366,047 165.6%
06/30/13 209,779 2,352,101 2,142,322 8.92 1,080,837 198.2
06/30/01 111,038 2,704,200 2,593,162 4.11 1,102,402 235.2
Schedules of Employer Contributions ‐ Other Postemployment Benefits
Annual
required Percentage
contribution contributed
OPEB ‐ City
June 30, 2016 $ 162,018 93%
June 30, 2015 158,387 102%
June 30, 2014 153,469 100%
OPEB ‐ Plan
June 30, 2016 $ 172,045 90%
June 30, 2015 168,281 99%
June 30, 2014 162,798 97%
See accompanying independent auditor’s report.
A‐72 • City of Boston Basic Financial Statements
Schedule of City’s Proportionate Share of the Net Pension Liability ‐ Boston Retirement System
(Amounts in millions)
2016 2015
City’s proportion of the net pension liability 36.78% 36.82 %
City’s proportionate share of the net pension liability $ 1,622 $ 1,417
Commonwealth’s proportionate share of net pension
liability associated with the City 2,426 2,092
Total $ 4,048 $ 3,509
City’s covered‐employee payroll (for the period ended on
the measurement date December 31, 2015 and 2014) $ 1,475 $ 1,423
City’s proportionate share of the net pension
liability as a percentage of covered‐employee payroll 109.97% 99.58%
BRS fiduciary net position as a percentage of the
total pension liability 55.76% 59.59%
Note: Schedule is intended to show information for ten years. Historical information prior to the
implementation of GASB Statement No. 68 is not required if the information is not available.
Additional years will be displayed as they become available.
Schedule of City’s Contributions ‐ Boston Retirement System
(Amounts in millions)
2016 2015
Actuarially determined contribution $ 179 $ 165
Contributions in relation to the actuarially
determined contribution 179 165
Contribution deficiency $ — $ —
Covered‐employee payroll (for the fiscal
year ended June 30, 2016 and 2015) $ 1,467 $ 1,442
Contributions as a percentage of covered‐employee
payroll 12.20% 11.44%
Note: Schedule is intended to show information for ten years. Historical information prior to the
implementation of GASB Statement No. 68 is not required if the information is not available.
Additional years will be displayed as they become available.
See accompanying independent auditor's report.
Top Related